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Jornal de Negócios - Portugal | Friday, August 24, 2012

Portugal's deficit target in danger

According to media reports on Thursday, due to a drop in tax revenues Portugal will not be able to lower its budget deficit to the targeted 4.5 percent of gross domestic product for 2012 without making further spending cuts. This bad news was only to be expected, comments the liberal business daily Jornal de Negócios: "Everything depends on the troika, which is due to visit us next week. … There are three alternatives: additional austerity measures to achieve the target, raising the target deficit or opting for a combination of more austerity and flexibility to buy time. The IMF already stated in June that it would be willing to give us more leeway to reach the target deficit. … But persuading Brussels to go along with this could prove more difficult. How are the EU politicians to explain that they will give Portugal more time, but not Greece? Of course Portugal can argue that more time doesn't necessarily mean more money. … However on the basis of current developments we must be prepared for the worst - which effectively means the introduction of another dedicated tax."

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