Portugal may need new easing of 2014 deficit goal - PM

LISBON Fri May 24, 2013 12:58pm BST

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LISBON (Reuters) - Portugal is on course to meet this year's deficit target but the government may require a further easing of the goals agreed with its EU and IMF lenders for 2014, Prime Minister Pedro Passos Coelho said on Friday.

Under the recently revised terms of a 78 billion euro ($100.6 billion) bailout agreed in 2011, Lisbon has to reduce the public deficit to 5.5 percent of gross domestic product this year from last year's 6.4 percent, then to 4 percent in 2014 and 2.5 percent in 2015.

"The government does not rule out that further flexibility of the goals may be required for 2014," Passos Coelho told parliament.

"Our obligation is to do all in our reach to meet what has been agreed as the preferred target. (But) we have already achieved some flexibility before ... and it can't be ruled out that further flexibility may become important for 2014."

The lenders already eased this and next year's targets in March due to a steeper than expected recession in Portugal and Europe.

Finance Minister Vitor Gaspar said on Wednesday in Berlin the European Commission was focusing on tackling the structural deficit rather than the nominal gap. That could give Portugal breathing space. Lisbon has also launched fiscal incentives for companies to bring about an economic recovery.

Passos Coelho dismissed a rise in the state sector deficit in January-April as being below the ceiling fixed for the period and said "we are meeting the objectives for this year's deficit".

He also said public debt was under control, denying claims by the opposition it was rising too steeply after Portugal's return to the bond market via two issues in January and May.

The central administration deficit rose to 2.5 billion euros in January-April from 2.1 billion a year earlier mainly due to a switch to monthly payments of holiday bonuses as well as an early contribution to the European Union budget, the finance ministry said. Fiscal revenues rose 3.4 percent in the period.

Gaspar has said the deficit is around 300 million euros below the ceiling agreed with the lenders.

(Reporting by Andrei Khalip and Daniel Alvarenga; Editing by Mark Trevelyan)

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