Portugal Agrees on Aid Plan With Wider Budget Deficit Targets

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By Joao Lima

May 3 (Bloomberg) -- Portugal reached an agreement on a 78 billion-euro ($116 billion) aid plan that will allow more time to reduce the country’s budget deficit after it last month became the third euro-region nation to request a bailout.

The three-year plan negotiated with officials arranging the European Union-led rescue set goals for a budget deficit of 5.9 percent of gross domestic product this year, 4.5 percent in 2012 and 3 percent in 2013, Prime Minister Jose Socrates said in Lisbon today. The government in March targeted a deficit of 4.6 percent this year, 3 percent in 2012 and 2 percent in 2013.

“The government was able to obtain a good agreement,” Socrates said in comments broadcast live from his official residence. “Naturally there are no programs of financial assistance that are not demanding and that do not imply a lot of work. That does not exist.”

Socrates said the plan does not involve more cuts in public-sector wages or in the minimum wage. State workers will not be fired and the government will not sell shares in state- owned savings bank Caixa Geral de Depositos SA as part of the agreement, he said. Consultations with Portuguese political parties will now follow.

Officials of the International Monetary Fund, European Commission and European Central Bank arrived in Lisbon last month to prepare the aid plan for Portugal following the government’s April 6 request for financial assistance.

The EU has said it aims to reach an agreement on the aid package for Portugal on May 16, three weeks before the country’s June 5 election and about one month before a 4.9 billion-euro bond redemption, Portugal’s only bond maturity until June 2012. Socrates stepped down March 23 after parliament rejected his deficit-cutting plan.