Page last updated at 15:25 GMT, Monday, 8 March 2010

Portugal unveils a series of budget cuts

Portuguese Finance Minister Fernando Teixeira dos Santos
Portugal's new austerity measures were unveiled by its finance minister

Portugal has announced a series of new austerity measures as it seeks to avoid a debt crisis like the one in Greece.

The Portuguese government is to cut welfare payments and trim job creation in the public sector. It also aims to raise taxes for the highest earners.

Portugal is seeking to cut its public deficit from 8.3% to 2.8% of GDP.

Earlier, the boss of the International Monetary Fund (IMF) said Greece's financial woes were unlikely to spread to Portugal and Spain.

There have been concerns that they could be the next major European economies to suffer a fiscal crisis.

IMF Managing Director Dominique Strauss-Kahn told the Reuters news agency: "No one knows what's going to happen tomorrow morning, but there's no reason why the spillover to Portugal or to Spain will take place."

While the current level of the Portuguese deficit is substantially above the 3% rule set for the 16 eurozone nations that share the single currency, Greece's current deficit is 12.7%.

Greece is currently alone is seeking outside assistance to sort out its finances.

Military cuts

Portugal's Finance Minister Fernando Teixeira dos Santos said he intended to introduce a new 45% rate of income tax for people earning more than 150,000 euros ($205,000; £139,000) per year.

They will allow us - when the time comes - to show that Greece isn't just supported politically but supported in all the aspects of its eventual requests
French President Nicolas Sarkozy

In addition, the Socialist government is to cut spending on military equipment over the next four years by 40%, and postpone plans to build a new high-speed rail link to Spain.

The country also aims to raise six billion euros through a number of privatisations.

Concrete methods

On Sunday, French President Nicolas Sarkozy pledged support for Greece after meeting with Greek Prime Minister George Papandreou.

Although the French president stopped short of detailing what support France will offer, he said it would stand "resolute" behind Greece, helping to lift the euro.

Mr Sarkozy said "concrete, precise methods exist" to assist Greece, but declined to reveal them.

"They will allow us - when the time comes - to show that Greece isn't just supported politically but supported in all the aspects of its eventual requests," he added.

The euro - which has fallen due to concerns about the impact of Greece's plight - was up 0.3% against the dollar to $1.3660 in Monday trading.

European Monetary Fund

Mr Papandreou says he does not want direct financial aid from other countries, merely assistance to make it cheaper for Greece to borrow funds from the international markets.

At present, concern about the state of the nation's finances make it more expensive it for it to borrow compared with most other European countries.

Mr Papandreou - who is meeting President Obama on Tuesday - has also suggested that the 16 nations that make up the eurozone should consider establishing a European Monetary Fund that could support a member state in times of financial crisis.

The European Commission confirmed on Monday that it is looking into such a proposal as a way to bolster the eurozone's financial stability.



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