Page last updated at 12:22 GMT, Wednesday, 14 April 2010 13:22 UK

Portugal may need to make further cuts, warns EC

Portuguese parliament votes on budget
The government's tough budget went unopposed by other parties

Portugal may need to take additional steps to cut its budget deficit if economic conditions worsen, the European Commission was warned.

European Commissioner for Economic Policy Olli Rehn said Portugal's planned budget cuts were "ambitious", but may have to be extended this year.

Last month, Portugal passed an austerity budget including public sector wage freezes and pension cuts.

However, there are some doubts about whether the budget goes far enough.

Credit downgrade

"The Portuguese stability programme is ambitious and complete for the years 2011 to 2013, but additional measures may be needed, especially for this year, if risks to the macroeconomic and fiscal developments materialise," Commissioner Rehn said.

The country's austerity budget aims to cut Portugal's public deficit very slightly to 8.3% in 2010. The government says it then wants to return to below the European Union threshold of 3% by 2013.

Two weeks after the budget was passed, credit ratings agency Fitch downgraded Portugal's credit rating from AA to AA- over concerns about its high levels of debt.

Investors are concerned about debt levels in many European countries.

Greece in particular has been struggling to convince markets it can cope with high levels of debt.

This has led to a multi-billion euro loan package offered by the eurozone and the International Monetary Fund should Greece be unable to borrow enough money to service its debt.

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