'Portugal Faces Two Years of Recession'

Portugal's caretaker government has signed up to a 78 billion euro EU/IMF bail-out, warning that its terms would push the country into recession for two whole years.

The bail-out package which requires drastic spending cuts and much higher taxes could make Portugal's economy shrink by two per cent in 2011 and 2012, the state-run BBC quoted Finance Minister Fernando Teixeira dos Santos as saying on Thursday.

Dos Santos announced that consumption taxes, but not income tax, would rise, and that Portugal's debt/GDP ratio would keep rising until 2013 before it starts falling. Other measures to be taken include changes to labor market laws and social benefits.'

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