LISBON (MNI) – Portugal fully intends to return to capital markets
by September 2013 as planned, Finance Minister Vitor Gaspar said
Tuesday.

Gaspar noted that the government in Lisbon has a bond maturing in
September 2013 and said it cannot rely on official creditors to
refinance it. There will be news in the near future on Portugal’s plan
for returning to the market, he added.

Maria Luis Albuquerque, secretary of state for treasury and
finance, said there is “variety of instruments” being prepared and that
they are in the medium range of the maturity spectrum.

Gaspar described the situation in Portugal and the Eurozone
generally as “difficult and dangerous.” He confirmed the 2012 GDP
forecast of -3% and the projection for unemployment of 15.5%. The
economic growth forecast for next year was downgraded to -1% in annual
terms, though Gaspar said that on a quarterly basis the economy should
start to grow again in 2Q.

He also said that the drop in domestic demand has hit tax revenue
significantly and that there are a number of tax increases in store,
including expanded brackets, higher rates across the board, higher
capital gains tax and a new luxury tax on high-end items of E1 million
or more. He confirmed there will be no changes to VAT tax rates.

Gaspar stressed that “another crucial element for an equal
distribution of sacrifices will be based on the supposition that
everybody is called to contribute to budget consolidation in accordance
with their real capacity.”

The finance minister also outlined plans for spending cuts in
health and education, as well as in public sector headcount and wages.
The country’s social security system will be streamlined so that
resources go to the most in need, and there will be stricter rules
governing jobless benefits, he said.

Gaspar, flanked by other senior ministry officials, spoke at a
press conference in which he outlined the fifth quarterly review of
Portugal’s E78 billion bailout program by the troika, which includes the
European Commission, European Central Bank and International Monetary
Fund.

The troika’s report, issued shortly after Gaspar stopped speaking,
said that Portugal’s loan program “remains broadly on track” but that
there were “significant headwinds.” More reforms and deficit cuts – of
the type Gaspar outlined in his press conference – will be needed, the
report said.

Because of fiscal slippage seen this year, the troika has relaxed
Portugal’s deficit targets. They have been revised up to 5% of GDP in
2012, 4.5% in 2013 and 2.5% in 2014.

Gaspar cited an increase in internal savings bolstered by stronger
exports and weaker imports, and he predicted that the country would hit
its trade balance target two years earlier than expected.

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