Portugal signals needs one more year to cut budget gap

LISBON: Portugal will need one more year to meet budget goals agreed under its 78-billion-euro ($104-billion) bailout after the economic outlook worsened, Finance Minister Vitor Gaspar signalled on Wednesday.

"It is reasonable to envisage that the European Commission will propose to prolong by one year the time given to Portugal to correct its excessive budget deficit," Gaspar told parliament.

Gaspar said the government will discuss the adoption of additional budget measures equivalent to 0.5 percent of GDP during the next review of the economy by its creditors, which starts next week.

Portugal's need for more budget cuts comes after a larger-than-expected slump in the economy in the fourth quarter of last year.

Several EU countries including France are expected to miss targets set by the European Commission on national deficits though officials have indicated countries could be allowed some leeway as long as they demonstrate progress with fiscal consolidation.

Portugal must cut its budget deficit to 4.5 percent of GDP this year from 5 percent last year.

It had planned to further reduce the deficit to 2.5 percent of GDP in 2014, bringing it to within the EU's 3 percent limit.

Economists have said Portugal, in its deepest recession since the 1970s, would struggle to meet budget goals.

The government this year has launched the largest tax hikes in living memory in the hope of raising much needed revenue but a larger-than-expected drop in the economy could undermine