AlQa'dah 20, 1432, Oct 18, 2011, SPA -- The European Commission on Tuesday praised Portugal's 2012 austerity budget as "courageous," after Lisbon issued a gloomy economic forecast for that year, according to dpa. The budget "shows a clear commitment of the government to achieving the 2012 deficit target of 4.5 per cent of gross domestic product," said Amadeu Altafaj, spokesman for European Economy Commissioner Olli Rehn. The austerity, which undermines consumption, is widely seen as contributing to a deepening recession in Portugal. The economy will contract 2.8 per cent in 2012, Finance Minister Vitor Gaspar said when presenting the draft budget to parliament on Monday. Six weeks earlier, the government had issued a forecast contraction of 1.8 per cent. This year, however, the government only expects the economy to shrink 1.9 per cent, below an earlier estimate of 2.2 per cent. Unemployment will climb from the current 12 per cent to 13.5 per cent in 2012, Gaspar said. "We welcome the emphasis put on scaling down expenditure, rather than raising revenues," Alfataj said. He praised Lisbon's efforts to contain public wages and the decision to extend legal working hours by half an hour. Such austerity measures contained in the budget contributed to "the much-needed improvement of the competitiveness of the Portuguese economy, which has been declining steadily," the spokesman said. Lisbon had taken "substantial measures" to counter "negative events" that had occurred in 2011, Alfataj said. Those events included a fiscal gap on Madeira island and one-off measures related to a bank rescue operation, he added. Portugal is trying to trim its budget deficit to 5.9 per cent of gross domestic product this year - a task that now appears more difficult after it turned out that the first six months' deficit was higher than expected, at 8.3 per cent. Lisbon has stepped up austerity measures in line with the conditions agreed with the European Union and the International Monetary Fund, which granted Portugal a bailout of 78 billion euros (107 billion dollars). Portugal's top trade union confederations announced a general strike, the date of which was due to be announced Wednesday.
