Portugal opposition says deficit underestimated

LISBON Sun Nov 21, 2010 12:26pm GMT

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LISBON (Reuters) - Portugal's budget deficit and public debt are higher than those reported by the government, which is trying to regain investor confidence amid a debt crisis, the leader the main opposition party said on Saturday.

Pedro Passos Coelho told a meeting of his Social Democratic Party items like state-run companies' debts were not included in the overall public debt, which the government puts at 82 percent of gross domestic product this year.

He said that the "true" total public debt stood as high as 112 percent of GDP, while the budget deficit should be at 9.5 percent of GDP, far above the minority Socialist government's target of 7.3 percent for the end of the year.

"The state has for many years been removing from the budget a series of activities, which has made a large part of our numbers fictitious," he said in televised remarks.

Government officials were not immediately available for comment. They have previously denied similar allegations by smaller opposition parties, saying that the statistical and budget data were regularly monitored by Brussels.

Last week, Passos Coelho confirmed the PSD will stand by its promise to let the government pass an austere 2011 budget in a final vote on November 26, adding that he expected the budget's passage to help investor sentiment after Portugal's debt risk premiums hit euro lifetime records earlier this month.

Investors see Portugal as the next weak link in the euro zone after Ireland, and as another potential candidate for a Greek-style bailout.

The government has denied it has any plans to request foreign aid and said Portugal's situation is very different from Ireland's since Portugal's deficit and debt are lower, while its banks do not face the same problems.

Ireland's public debt is projected at around 100 percent of GDP and the underlying fiscal deficit is around 12 percent.

Portugal aims to cut its budget deficit to 4.6 percent of gross domestic product next year and has budgeted painful spending cuts and tax increases to soothe investor concerns.

(Reporting by Andrei Khalip; Editing by Peter Graff)

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