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Portugal says 2012 budget deficit leapt to 6.4%

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(Globalpost/GlobalPost)

Portugal's 2012 budget deficit leapt to 6.4 percent of the nation's total output, from 4.4 percent one year earlier as the heavily-indebted eurozone member struggles to raise revenues and cut spending amid recession and soaring unemployment, the national statistics institute Ine said on Thursday.

The figure, calculated according to standards used by the EU's statistics office Eurostat, did not include revenue from the sale of a state holding in the Portuguese airport operator however, and thus far exceeded the 5.0 percent target set by the government and its international creditors, the European Commission and the International Monetary Fund.

They granted a financial rescue package worth 78 billion euros ($99.8 billion) in May 2011.

Portugal's public debt rose to 204.4 billion euros meanwhile, equivalent to 123.6 of gross domestic product last year, from 108.3 percent of GDP in 2011, the Ine data showed.

EU countries are not supposed to run deficits of more than 3.0 percent of GDP, and are expected to keep debt to no more than 60 percent of GDP.

Earlier this month, Finance Minister Vitor Gaspar said that Eurostat had rejected a request to use proceeds from the sale of airport operator ANA-Aeroportos de Portugal to cut the deficit. Had that had been allowed, it would have met the 2012 target at 4.9 percent of GDP, Mr. Gaspar said.

The country managed to reduce the number to 4.4 percent in 2011 through an exceptional measure that consisted of transferring funds set aside by banks for their staff pension funds to public coffers.

Despite boosting taxes and cutting public wages since the EU-IMF bailout, Portugal has struggled to cut the deficit.

But in light of a deteriorating economic situation, climbing unemployment and widespread public protests against austerity measures, Lisbon has been granted an extra year to bring the deficit in line with EU regulations.

EU countries are supposed to run public deficits of no more than 3.0 percent of GDP, and to work towards a balance or even a surplus in times of economic growth.

Portugal is now aiming for 2.5 percent by 2015, instead of 3.0 percent this year as stipulated under the original bailout agreement.

The central bank has forecast that after contracting by 3.2 percent last year, the economy will shrink by another 2.3 percent in 2013, and expects unemployment to reach a record 18.2 percent of the workforce by the end of December.

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http://www.globalpost.com/dispatch/news/afp/130328/portugal-says-2012-budget-deficit-leapt-64