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Portugal unveils ‘crisis tax’ to cut deficit

• Financial Times

José Sócrates, Portugal’s prime minister, on Thursday announced tough new austerity measures, including a “crisis tax” on wages and big companies, designed to more than halve the country’s gaping budget deficit in less than two years.

He said the new austerity drive, which follows similar moves bySpain, Greece and Ireland, was part of a broad European Union effort, including a €750bn emergency plan, to support the euro.

“These measures are absolutely necessary to defend our country, Europe and the euro,” he said.

The additional spending cuts and tax increases aim to reduce the budget deficit from 9.4 per cent of gross domestic product in 2009 to 7 per cent this year and 4.6 per cent in 2011. Portugal has initially targeted deficits of 8.3 per cent of GDP this year and 6.6 percent in 2011.

“The world has changed – and how – over the past two weeks,” Mr Sócrates said, explaining why he had decided to break recent pledges not to increase taxes.


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