The announcement comes two days ahead of a bond issue in which Portugal will try to raise 750 million euros ($1.02 billion). Greece was able to tap bond markets last week after also announcing more deep cutbacks to shore up its finances.
The two countries’ troubles have fueled a Europe-wide debt crisis that has undermined the euro and led the European Union to consider setting up a new European monetary fund to help support the euro.
Portugal aims to raise 6 billion euros ($8.2 billion) from privatizations, trim welfare benefits and slash other state expenditure in an effort to reduce the country’s heavy debt load, Finance Minister Fernando Teixeira dos Santos said.
The measures are part of a four-year austerity plan devised to convince financial markets and other euro zone countries that Portugal has its finances in order.
The plan “rests, essentially, on a reduction in public spending,” Teixeira dos Santos told a news conference.
Portugal’s budget deficit is projected to have hit a record 9.3 percent of gross domestic product last year, prompting fears it could face similar problems to Greece where a budget crisis has brought violent demonstrations, rattled the European Union and undermined the 16-country euro currency, of which Portugal is a member.
Portugal’s public debt is expected to climb to 85.4 percent of GDP this year, up from 76.6 percent in 2009, and Teixeira dos Santos said he predicts it will peak at 90.1 percent of GDP in 2012 before falling back.
Teixeira dos Santos said he expected the privatizations over the next four years to bring revenue equivalent to 3.6 percent of Portugal’s gross domestic product.
The center-left Socialist government also wants to keep annual pay hikes for state employees below the rate of inflation up to 2013, cut welfare benefits and scrap some tax breaks.
Teixeira dos Santos said he would create a new tax rate of 45 percent for people earning more than 150,000 euros ($205,000) a year and raise the ceiling on entitlements for tax breaks, but otherwise he ruled out tax increases.
“We are focusing on reducing spending and avoiding tax hikes,” Teixeira dos Santos said.
Planned spending on new military equipment projected for the next four years will be cut by 40 percent, and a plan to build a high-speed rail link to Spain will be postponed for at least two years.
The minority government was consulting Monday with opposition parties over the plan, though it has not said whether the measures will be put to a vote in Parliament.
The government has included some of the planned austerity measures, including a contested pay freeze for civil servants, in its 2010 state budget, which parliament is expected to approve on Friday. The budget was delayed by a general election last year.
