Friday, January 7, 2011

The Associated Press: Portugal's debt worries worsen as bond yields rise

The Associated Press: Portugal's debt worries worsen as bond yields rise: "Prime Minister Jose Socrates said Friday that state revenue was higher than forecast last year and spending was lower than expected, helping Portugal to meet its budget deficit target of 7.3 percent. Meanwhile, the economy is estimated to have grown by at least 1.3 percent in 2010.
Socrates said those figures 'should help instill confidence in the markets.'
However, analysts expect an austerity plan featuring tax hikes and pay cuts to cast Portugal into recession this year.
That would hurt tax revenue and place further stress on the budget which is already being drained by high interest rates on its borrowings and increased welfare payments resulting from a jobless rate that has risen to 11 percent.
Fears that economic growth in Europe will be slow and drag on governments' efforts to raise income were heightened by a downward revision to the eurozone's GDP growth in the third quarter of 2010. Eurostat, the EU's statistics agency, said output rose by only 0.3 percent, down on the previous estimate of 0.4 percent and way below the 1 percent growth recorded in the second quarter.
Business investment fell and personal spending declined, suggesting the region is in for a prolonged period of weak growth and government belt-tightening will be harder than expected."

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