Portugal PSD may pass budget if tax hike gradual-paper

LISBON, Oct 18 (BestGrowthStock) – Portugal’s largest opposition
party may allow the 2011 budget bill to pass if the minority
government agrees to hike taxes less than planned, raising them
gradually until 2013 instead, a newspaper said on Monday.

The centre-right Social Democrats (PSD) had previously said
they wanted no tax hikes next year and threatened to vote down
the budget. The new stance, if confirmed, is a step towards a
compromise with the government.

Quoting no sources, the Jornal de Negocios said PSD leader
Pedro Passos Coelho and his closests aides met on Sunday to
isolate key points for budget talks with the government which
will only be made public on Tuesday.

The paper, Portugal’s second largest business daily, said
the PSD also wants the government to acknowledge that the budget
deficit target of 4.6 percent next year is too ambitious.
One-third of the government’s budget consolidation plan for
next year hinges on tax hikes, including a two-point increase in
value-added tax. The rest comes from spending cuts, including a
five-percent cut in civil servants’ salaries. [ID:nLDE69C26Q]

A longer-term agreement through 2013 will call for a
somewhat more gradual deficit reduction to below 3 percent, a
year later than the government has planned, but still before the
2013 deadline set by Brussels, the paper said.

“We will not comment on this sort of report until after our
meeting tommorrow night,” a PSD spokesman said.

Finance Minister Fernando Teixeira dos Santos said in a
weekened interview with SIC television that Portugal would have
to ask for a bailout from the European Union and International
Monetary Fund if the budget is not approved by parliament.

He has also said he did know what additional austerity steps
could be introduced if market scepticism about the country’s
ability to cut its deficit persists.

The risk premiums on Portuguese bonds hit euro lifetime
highs at the end of last month on concerns about its ability to
cut the budget deficit. The spreads have narrowed of late, but
failure to pass the budget is likely to lead to political
paralysis and send bond yields spiralling higher again.
(Reporting by Andrei Khalip; Editing by Louise Ireland)

Portugal PSD may pass budget if tax hike gradual-paper