New Portuguese steps pave way for stronger EFSF -EU

BRUSSELS, March 11 (Reuters) - New Portuguese measures to consolidate its public finances pave the way for boosting the euro zone emergency fund's lending capacity and scope of operations, EU Economic and Monetary Affairs Commissioner Olli Rehn said.

Portugal announced additional spending cuts and reforms on Friday to cut its deficit by an extra 0.8 percent of gross domestic product this year, in an attempt to stave off intense pressure to take a bailout.

The announcement from Lisbon came as euro zone leaders were set to meet in Brussels to discuss changes to the European Financial Stability Facility (EFSF) and the set-up of the European Stability Mechanism -- the current and future funds that are to help euro zone countries cut off from markets.

The discussions on these "financial backstops" are part of a comprehensive response to the euro zone sovereign debt crisis. They include boosting the effective lending capacity of the EFSF and possibly allowing the fund to buy bonds of distressed countries or extending them a flexible credit line -- both controversial ideas strongly opposed by Germany.

"The commitments of the Portuguese government clear an important building-block of the needed comprehensive response to the sovereign debt crisis, and call for progress concerning the other blocks, notably linked to the reinforcement and increased flexibility of the financial backstops," Rehn said in a statement.

(Reporting by Jan Strupczewski, editing by Rex Merrifield)