UPDATE 1-Portugal PSD says govt vowed to cut spending further

* Primary spending to be cut by 500 mln euros, PSD says

* PM says 4.6 pct deficit goal to be met

(Adds PM quotes, details)

LISBON, Nov 2 (BestGrowthStock) – Portugal’s government has promised
to cut spending by a further 500 million euros as part of a deal
with the opposition Social Democrats (PSD) to pass an austere
2011 budget, the PSD leader said on Tuesday.

The deal hammered out last Friday included concessions by
both sides, creating a gap of 500 million euros ($697
million) in the budget bill, which must be closed to meet next
year’s deficit target of 4.6 percent of gross domestic product.

“The government has committed itself to presenting measures
that reduce primary public spending to counterbalance the 500
million euros,” PSD leader Pedro Passos Coelho told reporters
before parliament was to debate the budget bill.

Investor doubts about Portugal’s ability to rein in its
public spending have made the Iberian country’s borrowing costs
soar this year, although an austere budget plan combining
spending cuts and tax hikes has soothed some of these fears.

The premium investors demand to hold Portuguese bonds rather
than safer German Bunds rose about 7 points early on Tuesday to
378 bps, following other euro zone peripheral issuers, but later
fell to 376 points.

The first budget vote, on the general guidelines, is on
Wednesday with the bill set to clear the first hurdle after the
PSD said it would abstain following the deal with the
government. This leaves the ruling Socialists with enough seats
to push it through.

Calling the bill “responsible and courageous”, Prime
Minister Jose Socrates said the deficit goal would be met,
regardless of the concessions made to the opposition. These
included lower fiscal revenues, for example from planned cuts in
tax benefits. [ID:nLDE6A009F]

“The negotiations that we’ve had fully safeguard the essence
of the budget proposal, and the essence, from the very start,
has been meeting the deficit target of 4.6 percent of GDP,”
Socrates told parliament at the start of the budget debate.

He hailed the deal, saying it “prevents the irresponsibility
of a budget crisis and leaves the country in a better shape to
overcome difficulties and protect itself from the turbulence in
the financial markets.”

Passos Coelho said he expected Finance Minister Fernando
Teixeira dos Santos to present the measures to reduce primary
spending after the first vote when the budget goes to
parliamentary commissions for detailed discussion.

The final vote is due on Nov. 26.

(Reporting by Sergio Goncalves, Andrei Khalip and Shrikesh
Laxmidas; editing by Barry Moody)

UPDATE 1-Portugal PSD says govt vowed to cut spending further