Portugal austerity plan has no wage cuts, tax hikes: reports

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Portugal's long-term budget austerity plan encompasses spending cuts via reducing tax breaks and containing public sector wages, but entails no Greece-style wage cuts or tax hikes, local media said on Sunday.

The minority Socialist government on Saturday approved the guidelines of the plan, to be presented to Brussels later this month, but postponed the release of details, sought by markets demanding commitment to deficit and debt cuts, to this week.

Officials have said the program combines public spending cuts with fiscal stability, but would not elaborate.

Markets have been jittery about Lisbon's large budget deficit, which spiked to 9.3 percent of gross domestic product last year, since Greece's fiscal crisis erupted.

Concern focuses on sharply rising debt servicing costs due to the impact of the deep economic slowdown, although both Portugal's deficit and debt are much below Greece's.

Without quoting anyone in particular, Diario de Noticias daily said the government will cut tax breaks linked to healthcare and education from 2011, reduce public investment and impose taxes on profits made in the stock market.

It said that a freeze on public sector salaries will be extended at least for another year beyond 2010.

But more drastic solutions, like those promised in Greece and Ireland including cuts in the 13th salary and vacation subsidies, are not envisaged in the document, it said.

Portugal's largest union, the 725,000-strong CGTP, has threatened more strikes following last Thursday's civil servants' walkout if the government extends wage freezes.

Local media also said the plan would include the sell-off of state-owned stakes in 32 companies. The reports did not say how much the government would save or gain with these measures.

Pressured by the EU and markets, Greece last Wednesday announced new austerity measures worth 4.8 billion euros, including a 2 percentage point hike in value-added tax as well as cuts in holiday and vacation salary bonuses. Ireland late last year announced pay cuts in the public sector.

The long-term plan, which is required under the European Union's so-called stability and growth program, aims to cut Portugal's budget deficit to below 3 percent of gross domestic product by 2013, by more than two-thirds from 2009 levels.

Prime Minister Jose Socrates has already set meetings for Monday with all opposition parties, unions and business groups to discuss the plan in a bid to show a concerted national effort to repair public finances and win broad support for the plan.

Some details should be made public during these discussions.

Publico daily said parliament will debate the plan on March 25, and only after this it will be sent to Brussels.

(Reporting by Andrei Khalip; Editing by Jon Loades-Carter)

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