Portugal vows to cut spending, eyes post-bailout tax cuts

LISBON Wed Oct 30, 2013 5:19pm EDT

Deputy Prime Minister Paulo Portas attends a news conference in Lisbon October 3, 2013. REUTERS/Rafael Marchante

Deputy Prime Minister Paulo Portas attends a news conference in Lisbon October 3, 2013.

Credit: Reuters/Rafael Marchante

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LISBON (Reuters) - Portugal's government on Wednesday promised to keep cutting state spending after the end of an EU/IMF bailout next year, saying that would allow it to start lightening the tax burden by 2015 while continuing budget consolidation.

In a vague document containing no concrete numbers for proposed cuts, the government said it wanted to reduce and streamline public spending across the board while continuing to reduce the numbers of public sector workers.

"Portugal's spending is excessive if we look at our incomes, and our taxpayers are making one of the most demanding efforts in the European Union considering their quality of life," Deputy Prime Minister Paulo Portas told a briefing.

The government has recently budgeted nearly 4 billion euros in expenditure cuts for next year to meet bailout fiscal goals, but Portas said more had to be done for the state to become sustainable and for public debt to start falling.

He said Portugal's per-capita public expenditure was about 30 percent higher than Europe's average when adjusted to purchasing power parity, while the tax burden was about 20 percent higher than average.

"The main use and reason of the reform of the state is to reduce the tax burden and state bureaucracy," Portas said. The government has sharply increased taxes since 2011 under the bailout, which weighed on the economy that is only now beginning to recover from its worst recession since the 1970s.

Portas said the government would seek to "invert the trajectory of income tax rises and this process should begin under this legislature" that runs until mid-2015.

The government said it would start talks with political parties, unions and business groups to discuss the reform guidelines so as to work out more concrete proposals.

Portas also renewed calls to put the so-called "golden rule" establishing deficit and debt ceilings into the constitution, saying it would be in the national interest and "give a clear message of confidence" to European partners and markets.

Previous government attempts to put the Berlin-proposed golden rule in the constitution have failed due to strong objections from the opposition.

Although the government wields a comfortable majority in parliament, it does not have enough seats to amend the constitution.

(Reporting by Sergio Goncalves and Andrei Khalip; editing by Andrew Roche)

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