THE WALL STREET JOURNAL: LISBON -- Portugal Thursday followed in Spain's footsteps by announcing new austerity measures to shore up investor confidence and avoid a Greece-style financial crisis.
Just days after European Union leaders put together a giant euro-zone financial backstop that was designed in part to ease investor concern about their debts, Portugal and Spain delivered on commitments to accelerate deficit reduction efforts.
"These additional measures are fundamental to defend Portugal and our economy, and to reinforce our credibility in international markets," Portuguese Prime Minister Jose Socrates told journalists after a weekly cabinet meeting.
The Socialist prime minister said he agreed on the measures with Pedro Passos Coelho, leader of the country's biggest opposition party, the Social Democratic Party.
The government approved a value-added tax increase of 1 percentage point across all categories, to 6% for necessities, 13% for restaurants and to 21% for most other goods and services. Companies with profits of more than €2 million ($3.6 million) will pay an extra 2.5% tax on their profits.
Government ministers and other top state employees will have their salaries reduced by 5% starting this year. All the new measures will last until the end of 2011. >>> Jeffrey T. Lewis and Jonathan House | Thursday, May 13, 2010
