Updated: Thu, 18 Apr 2013 12:06:39 GMT | By Agence France-Presse

Portugal announces new budget cuts worth 600 mn euros

The Portuguese government announced on Thursday budget cuts worth around 600 million euros ($780 million) to meet targets it has set with international creditors, following a rejection of previously proposed austerity measures by the country's constitutional court.


"The cabinet decided to fix budget limits for each ministry," junior budget minister Luis Morais Sarmento told a press conference.

"The measures will affect spending on personnel, material and services, along with daily expenses," he added.

Without providing extensive details, the Portuguese minister said that the latest measures were worth "around 600 million euros, or 0.5 percent of GDP" or gross domestic product.

Miguel Poiares Maduro, an assistant to Portuguese Prime Minister Pedro Passos Coelho, added that the new measures would include a reprogramming of European Union (EU) funds, and a renegotiation of public-private initiatives that could save around 300 million euros.

"The government is giving priority to negotiations but in the event of failure it does not rule out fiscal measures on these contracts," Poiares Maduro said.

Representatives of Portugal's creditors, the EU, International Monetary Fund (IMF) and the European Central Bank (ECB), are in Lisbon this week and have approved the budget cuts, details of which are to be released along with a revised budget to be sent to parliament in May, he added.

On April 5, the Portuguese Constitutional Court rejected several austerity measures contained in the 2013 budget which deprived the government of around 1.3 billion euros in savings.

The ruling made it difficult to reduce the public deficit to 5.5 percent of GDP to keep Portugal eligible for funds under its 78-billion-euro bailout from the EU and IMF.

After the court's decision, Coelho vowed not to abandon austerity while pledging to reduce public spending by around 1.2 billion euros this year.

Validation of the new measures by a troika of EU-IMF-ECB representatives was needed to release the eighth payment, of 2.0 billion euros, in aid and for approval by eurozone finance ministers of a seven-year delay in credit reimbursement payments.

"The measures are aimed at guaranteeing that Portugal is granted the eighth payment," Maduro said.

Separately, Portuguese Defense Minister Jose Pedro Aguiar-Branco announced that Lisbon has decided not to privatise the naval shipyard in Viana do Castelo, northern Portugal, because it felt the country's "vital interests were not protected."

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