# Portuguese crisis



## John999 (Jul 6, 2009)

Portugal has been seen as one of the European Union members most vulnerable to an attack by the markets after Greece. 
The austerity drive is designed to reduce the Portuguese budget deficit from 9.4 per cent of gross domestic product in 2009 to 7 per cent this year and 4.6 per cent in 2011. Portugal had initially targeted deficits of 8.3 per cent of GDP this year and 6.6 per cent in 2011. As part of the cuts, politicians and public sector managers will see their salaries fall five per cent. 
The tax rises, which are being called a “crisis tax”, include a 2.5 percentage point increase in corporate tax to 27.5 per cent on annual profits above €2m, a 1 percentage point increase in value added tax to 21 per cent and increases of up to 1.5 percentage points in income tax. 
Asked why he had broken a pledge not to increase taxes, Mr. Sócrates said: “The world has changed, and how, in the past two weeks.”
The minority socialist government said it expected social tensions to increase as trade unions called for demonstrations. But it was confident that the protests would not turn violent.


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