Portugal government sticks to bailout goals in confidence motion

LISBON Thu Jul 25, 2013 7:06pm BST

Portugal's Prime Minister Pedro Passos Coelho (R) and President Cavaco Silva (2nd L) attend the swearing-in ceremony of new ministers, including Deputy Prime Minister Paulo Portas (not pictured), at the Belem palace in Lisbon July 24, 2013. REUTERS/Rafael Marchante

Portugal's Prime Minister Pedro Passos Coelho (R) and President Cavaco Silva (2nd L) attend the swearing-in ceremony of new ministers, including Deputy Prime Minister Paulo Portas (not pictured), at the Belem palace in Lisbon July 24, 2013.

Credit: Reuters/Rafael Marchante

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LISBON (Reuters) - Portugal's reshuffled coalition government stuck to plans to complete the country's EU/IMF bailout programme while promising to promote growth, in a document sent to parliament on Thursday tabling a symbolic vote of confidence.

The ruling centre-right coalition narrowly avoided a breakup this month that would have put the country back at the centre of the euro zone's debt crisis, by striking a deal giving its junior partner more clout in the cabinet.

Having healed its internal rift, at least for now, the coalition will hold the vote of support on Tuesday in parliament, where it holds a large majority and easily defeated a no-confidence motion a week ago.

The government agreed to table the confidence motion after talks with the president, as a way to show that it has put the political turmoil behind it.

"The government asks parliament for a vote of confidence in order to press on, with determination, for the completion of the assistance programme and to launch a new sustained cycle of development and growth," the document said.

Some investors fear the re-jigged government may be less amenable to further budget tightening to meet its bailout goals. The leader of the junior coalition party, Paulo Portas, has previously objected to some of the austerity policies that have driven Portugal into its worst recession since the 1970s.

Portas has been promoted to deputy premier in the reshuffle, and his rightist party has also obtained the post of economy minister.

The document on the vote of confidence showed no signs of a change of course, however. It said the economic and fiscal adjustment must continue for the country to regain its financial independence after the rescue programme ends in mid-2014.

The government expects a return to meagre economic growth in 2014 and estimates that the economy will have started recovering in the second quarter.

Under its bailout goals, Lisbon must cut its budget deficit to 5.5 percent of gross domestic product this year from last year's 6.4 percent, and then reduce it to 4 percent in 2014, most likely meaning the country faces further austerity measures for the next year or more.

(Reporting By Andrei Khalip; Editing by Hugh Lawson)

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