PORTUGAL:PORTUGAL HAS shelved plans to build a new Lisbon airport and other large-scale infrastructure projects as part of additional austerity measures intended to help defend the country from the spreading effects of the Greek debt crisis.
The measures announced yesterday coincided with an overall European Union effort to protect Portugal and other vulnerable euro-zone countries from the wrath of financial markets.
José Sócrates, the prime minister, said additional public spending cuts would reduce the budget deficit to 7.3 per cent of gross domestic product this year, compared with a previous target of 8.3 per cent.
The minority Socialist government will also discuss further “containment measures” with the opposition Social Democrats (PSD), who have pledged to support deficit-reduction plans.
It was the second package of additional austerity measures Portugal has announced in less than two weeks as its government borrowing costs and share prices came under increasing pressure.
The spread on Portuguese government bonds over their German equivalents on Friday reached the highest level since the launch of the euro. The Lisbon stock market fell 10 per cent over the past week.
The decision to postpone the building of a new international airport, a new Lisbon bridge over the Tagus estuary and several motorways highlights the extreme pressure Portugal is facing.
The projects were part of infrastructure plans expected to cost more than €60 billion over the next decade. Mr Sócrates has vigorously defended them as vital to lifting Portugal out of recession and creating jobs.
“I have not changed my opinion,” Mr Sócrates said in Brussels this weekend. “These projects are essential for Portugal to modernise. But it makes sense to wait until the financial situation stabilises.” Most projects have been postponed indefinitely. But Mr Sócrates said a high-speed train link between Lisbon and Madrid would go ahead because contracts had been signed.
His reversal on infrastructure policy came as Vítor Constâncio, the governor of Portugal’s central bank, said the sovereign debt crisis affecting the euro zone required Portugal to be more “brusque, rapid and severe” in cutting public spending.
The government has rushed forward other austerity measures initially planned for 2011-13. – (Copyright The Financial Times Limited 2010)