Bailed-out Portugal Adopts Stiff Tax Hikes
LISBON, Portugal (AP) â¿¿ Portugal's Parliament on Tuesday approved unprecedented tax increases despite a broad public outcry and concerns that the latest austerity package will prolong the bailed-out country's recession.
The center-right coalition government used its overall parliamentary majority to pass its 2013 budget. All opposition parties voted against the deficit-reduction measures which will cost most workers the equivalent of at least a month's income next year.
Trade unions and business leaders complain the spending plan doesn't do enough to revive an economy that's headed into a third straight year of recession. Hundreds of people protested against the budget outside the parliament building in Lisbon.Portugal, like other eurozone countries Greece and Ireland, needed a hefty financial rescue to spare it from bankruptcy. It took a â¿¬78 billion ($101 billion) bailout 18 months ago and in return promised to reduce its heavy debt and implement economic reforms. Portugal's bailout creditors â¿¿ the other members of the group of 17 European Union countries that use the euro, the European Central Bank and the International Monetary Fund â¿¿ are keen to avoid Portugal becoming another trouble spot like Greece and have praised the government's strategy. The government says its hands are tied. The three-year bailout deal locks Portugal into cutting its deficit, otherwise its creditors won't send it money. Portugal has so far received â¿¬61 billion of the bailout funds. Finance Minister Vitor Gaspar, who has described the tax hike as "enormous," told lawmakers the budget is "another determined step toward recovery." It will help restore investor confidence in Portugal, allowing it to return to international credit markets as planned in September 2013, he said. The government is aiming to increase income tax revenue by 30 percent next year while enacting spending cuts worth â¿¬2.7 billion. The goal is to reduce the budget deficit to 4.5 percent next year, down from a targeted 5 percent this year.
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