Irish crisis forces Portugal to adopt austerity budget for 2011

In its efforts to cut the budget deficit and prop up the nation's economy from a looming debt crisis, the Portuguese parliament Friday approved an austerity budget for 2011 hoping that the move could avoid a potential bailout.

The government action came amid a sharp increase in borrowing costs and growing concerns of rising national debt that could lead to a potential financial rescue similar to that of Greece and Ireland.

Earlier this week, Ireland opted for an 85-bn bailout from the EU and IMF, and subsequently unveiled a 4-year austerity plan earlier this week aimed at returning to financial stability. (See: Ireland unveils 4-year 'National Recovery Plan' for €85-billion bailout)

According to Associated Press, Portuguese Prime Minister Jose Socrates said that the country had ''no alternative at all'' to the belt-tightening policy. ''We must make this effort,'' Socrates said.

The prime minister stressed that the country is aiming to cut the this year's budget deficit to 7.3 per cent of gross domestic product from 9.3 per cent in 2009 that was one of the highest in the EU, and further targeting to reduce it to 4.6 per cent in 2011, below the expected average for the EU.

Socrates said that the new budget is expected to boost investor sentiment.