Portugal Narrows Deficit With Salary Cuts; Tax Revenue Drops

Portugal’s Finance Ministry said the government deficit narrowed in the first 11 months of the year after state workers salaries were cut.

Based on comparable figures, the deficit of the central administration and social security agency was 6.5 billion euros ($8.6 billion), less than a shortfall of 7.78 billion euros in the same period of 2011, the Finance Ministry’s budget office said in a report on its website.

Spending fell 1.9 percent. Personnel costs declined 18 percent. Tax revenue dropped 5.2 percent, with revenue from indirect taxes declining 4.4 percent and revenue from direct taxes falling 6.4 percent.

Portugal has been given more time to narrow its budget deficit after tax revenue missed forecasts and the economy heads for a third year of contraction in 2013. The government aims to reach a deficit of 5 percent of gross domestic product in 2012 and 4.5 percent in 2013.

This year’s revenue from taxes and social-security contributions will be about 3.3 billion euros lower than planned in the 2012 budget, Finance Minister Vitor Gaspar said on Oct. 3.

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