* Must include more new measures to meet fiscal
targets-analystsBy Sergio GoncalvesLISBON, Oct 13 (Reuters) - Portugal’s centre-right
government will need to go further in 2012 than the budget
austerity set out in its international bailout if it wants to
meet tough fiscal goals, analysts said as the government
prepared to approve next year’s budget.The 2012 draft budget, which should be approved by the
cabinet on Thursday and presented to parliament on Monday, is
likely to include tougher austerity than originally planned
because of shortfalls this year which the government is set to
plug with one-off measures.The government does not plan to immediately release any
budget details.The coalition government took over in June backed by a solid
parliament majority, which can easily pass the budget even if no
other party supports it. The vote is scheduled for Nov. 29.But shortly after taking office in June, the government
identified a shortfall of 2 billion euros, or 1.5 percent of
GDP, due to lower-than-expected cuts in public sector jobs and
the island of Madeira’s failure earlier to report the full scale
of its debt.Under Portugal’s 78-billion-euro bailout from the European
Union and IMF, the country needs to cut next year’s budget
deficit to 4.5 percent of gross domestic product from 5.9
percent this year. In 2010 the deficit reached 9.8 percent.”This (2012) budget is key because if Portugal does not meet
the goals set by the ‘troika’, it is just a question of time
before falling into a similar situation to Greece, with a second
bailout and eventual default,” said Filipe Garcia, head of
Informacao de Mercados Financeiros consultancy in Porto.”But cutting the 2012 deficit to 4.5 percent requires
tougher measures, both on the revenue and spending side, than
what was agreed with the troika,” he said.The steps under the bailout include cutting the number of
public servants by 2 percent by 2014, freezing civil servants’
wages following this year’s 5 percent cut, cutting subsidies and
fiscal benefits and raising value-added tax on some products to
the maximum 23 percent rate from previously lower rates.The government has already slapped a one-off 50 percent
tax on year-end salary bonuses and brought forward a tax hike on
electricity and natural gas. It is also set to transfer the
pension funds run for some banks’ employees to state coffers to
cover the shortfall.PRIMARY CUTSWhile the banks’ pension funds have enough cash to guarantee
that this year’s budget gap goal is met even if the slippage
turns out to be bigger, such transfers are not the structural
measures the “troika” of the EU, IMF and European Central Bank
are looking for.Rui Bernardes Serra, chief economist at Montepio bank, also
said the tax burden was already too high in Portugal,
threatening to send the economy into a recessive tailspin, and
the government had to focus its efforts on spending cuts.”The government has to, at least, meet the target of cutting
its primary current spending by 10 percent, which implies a 15
percent cut in non-salary spending, and this cut has to be
across the board,” he said.Analysts say there will have to be drastic cuts in
healthcare — in terms of medicine costs, excessive use of
services and overtime payments to staff — as well as education
and social security benefits. Unemployment is already at a
3-decade high of 12 percent.”Tax hikes would have to be surgical, aimed at certain types
of fairly inflexible consumption, but they cannot be excessive
as they create growing incentives for tax evasion,” Bernardes
Serra said, adding that such tax hikes could involve tobacco and
municipal real estate levies.