Peter Wise
Financial Times
September 30, 2010

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Portugal has announced a new package of austerity measures designed to reassure markets that it will meet ambitious deficit-reduction targets and not seek emergency funding in a Greek-style crisis.

The measures include a 5 per cent cut in the public sector wage bill and a 2 percentage point increase in value added tax to 23 per cent, José Sócrates, Portugal’s centre-left prime minister, said on Wednesday.

The package was “absolutely essential to defend the international credibility of our economy”, he said.

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Portugal, like Ireland, has seen its cost of borrowing rise to record levels this week amid market concerns that two countries could be forced to seek bail-out loans from the international community, triggering a new eurozone crisis.

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