Portugal's budget meets deficit rules, aims to ease austerity

(LISBON) - Portugal has set itself on a road towards recovery with a 2015 budget deficit well within EU fiscal limits, the second eurozone bailout country after Ireland to begin to emerge from years of austerity.

Lisbon will present its budget to Brussels on Wednesday after raising slightly on Tuesday its projected deficit to 2.7 percent of gross domestic product.

That is up from the 2.5 percent it had earlier promised lenders, but still below the EU 3.0-percent ceiling.

"To have insisted on a deficit of 2.5 percent (of GDP) would have been budgetary fanaticism," said Prime Minister Pedro Passos Coelho.

Portugal, which escaped bankruptcy in 2011 thanks to an international bailout of 78 billion euros ($100 billion), says it will remain cautious but also wants to ease the fiscal pressure to encourage the recovery of its fragile economy.

The government has refused to impose more hardship on the Portuguese.

"It would be counterproductive to increase taxes especially at the time when we need to get the economy moving a little more," Passos Coelho said when announced the 2.7-percent budget deficit target, the same as Ireland's.

However, Lisbon's growth estimates are no where near Dublin's 3.9-percent forecast for next year.

Portugal is predicted to see its economy expand by only 1.0 percent this year, and 1.5 percent in 2015.

On Friday, Ratings agency Fitch maintained its 'BB+' note for Portugal with a positive outlook, noting that there is a risk of "some slipping of the public deficit" in 2015.