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tax increases
Portugal’s PM Pedro Passos Coelho has said a court ruling striking down parts of his government’s budget means it will have to make other deep spending cuts.
Pedro Passos Coelho said social security, health, education and public enterprises would have to be cut.
This would allow the country to avoid a second eurozone bailout, he said.
The European Commission warned it not to depart from the bailout terms, and said carrying out the agreed programme was a precondition for further help.
Portugal’s PM Pedro Passos Coelho has said a court ruling striking down parts of his government’s budget means it will have to make other deep spending cuts
“Any departure from the programme’s objectives, or their re-negotiation, would in fact neutralize the efforts already made and achieved by the Portuguese citizens,” it said in a statement.
The Portuguese Constitutional Court struck down more than 1 billion euros ($1.3 billion) of savings that the right-of-centre government had said were needed to meet the terms of its existing bailout.
In a statement to the nation on Sunday evening, Pedro Passos Coelho repeatedly used the phrase “national emergency” to describe Portugal’s situation.
He said the ruling striking down the budget’s suspension of holiday bonuses for public sector workers and pensioners – about 7% of their annual income – meant it must find alternative savings or seek a second bailout.
The government would, he said, do everything in its power to avoid having to ask its European partners for more aid.
Since tax increases were out of the question after the unprecedented increases already in the budget, he said, the only option was to cut back on other public services.
“Today, we are still not out of the financial emergency which placed us in this painful crisis,” he said.
“After this decision by the Constitutional Court, it’s not just the government’s life that will become more difficult, it is the life of the Portuguese that will become more difficult and make the success of our national economic recovery more problematic.”
Opposition leaders have accused Pedro Passos Coelho of using the court ruling as an excuse to press ahead with cuts to public services that he was planning anyway.
They say the government must resign, having lost credibility after two budgets in two years were ruled unconstitutional.
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The Greek parliament has approved a series of unpopular tax rises aimed at boosting revenue in line with Athens’ commitments to international creditors.
The measures, approved overnight, introduce a new top tax rate of 42% for Greeks earning more than 42,000 euros ($56,000) a year.
Corporate rates also go up and the tax base now includes low-earning farmers.
Greece has been kept solvent by huge rescue loans from its EU partners and the IMF since May 2010.
The Conservative-led government insists the new measures, designed to raise up to 2.3 billion euros this year, are fair.
“We are not in favor of taxes,” Deputy Finance Minister Giorgos Mavraganis said.
“But in the current situation we must lead the country out of its impasse.”
The Greek parliament has approved a series of unpopular tax rises aimed at boosting revenue in line with Athens’ commitments to international creditors
The changes are part of an overall package approved in November to allow Greece to qualify for further bailout funds.
But the opposition says the tax rises will increase hardship for ordinary Greeks. The main opposition Radical Left Coalition says austerity has “demolished the country’s middle classes”.
Deep spending cuts and job losses have triggered street unrest across Greece in recent years.
President Barack Obama has hailed a deal reached to stave off a “fiscal cliff” of drastic taxation and spending measures as “just one step in the broader effort to strengthen the economy”.
Barack Obama was speaking after the House of Representatives passed a Senate-backed bill by 257 votes to 167.
It raises taxes for the wealthy and delays spending cuts for two months.
There had been intense pressure for the vote to be passed before financial markets reopened on Wednesday.
In Tuesday night’s house vote, 172 Democrats and 85 Republicans voted in favor of the bill.
A majority of Republicans, 151 in total, voted no, along with 16 Democrats.
The bill had been passed in the Senate less than 24 hours earlier by 89 votes to eight after lengthy talks between Vice-President Joe Biden and Senate Republicans.
Barack Obama has hailed a deal reached to stave off a fiscal cliff of drastic taxation and spending measures
Asian markets have responded positively to the move, with Hong Kong’s Hang Seng index up 2.1% on Wednesday morning, while South Korea’s Kospi added 1.7% and Australia’s ASX 200 rose 1.2%.
Speaking before returning to Hawaii for his interrupted Christmas holiday, Barack Obama said that in signing the law he was fulfilling a campaign pledge.
“I will sign a law that raises taxes on the wealthiest 2% of Americans… while preventing a middle-class tax hike,” he told a White House press conference.
The US deficit was still too high, Barack Obama said: “While open to compromise on budgetary issues, he would not offer Congress spending cuts in return for lifting the government’s borrowing limit, known as the debt ceiling.”
“There is a path forward, if we focus not on politics, but on what’s right for the country,” he added.
The “fiscal cliff” measures – cutting spending and increasing taxes dramatically – came into effect automatically at midnight on Monday when George W. Bush-era tax cuts expired.
The 1st of January deadline triggered tax increases of about $536 billion and spending cuts of $109bn from domestic and military programmes.
Economists had warned that if the full effects of the fiscal cliff were allowed to take hold, the resulting reduction in consumer spending could have sparked a new recession.
The compromise deal extends the tax cuts for Americans earning under $400,000 – up from the $250,000 level Democrats had originally sought.
In addition to the income tax rates and spending cuts, the package includes:
- Rises in inheritance taxes from 35% to 40% after the first $5 million for an individual and $10 million for a couple
- Rises in capital taxes – affecting some investment income – of up to 20%, but less than the 39.6% that would prevail without a deal
- One-year extension for unemployment benefits, affecting two million people
- Five-year extension for tax credits that help poorer and middle-class families
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Republicans in the US House of Representatives are blocking a bill that would prevent a tax increase on the first $250,000 of income earned by all Americans, President Barack Obama said on Saturday.
The Democratic-controlled Senate has approved the measure, but Barack Obama said House Republicans have “put forward an unbalanced plan that actually lowers rates for the wealthiest Americans”.
Barack Obama supports a plan to raise taxes on families earning more than $250,000. In his weekly radio and Internet address, Barack Obama said “the math just doesn’t work” on the GOP plan.
Barack Obama’s comments mark the fourth time since his re-election that he has used the radio address to push for middle-class tax cuts as part of a plan to avert a looming fiscal cliff – and his most sharply partisan tone.
The president said his plan to raise taxes on the wealthiest Americans should come as no surprise to Republicans or anyone else.
“After all, this was a central question in the election. A clear majority of Americans – Democrats, Republicans and independents – agreed with a balanced approach that asks something from everyone, but a little more from those who can most afford it,” Barack Obama said.
His plan is “the only way to put our economy on a sustainable path without asking even more from the middle class”. It also is the only plan he is willing to sign, the president said.
Barack Obama supports a plan to raise taxes on families earning more than $250,000
Barack Obama’s comments came as House Speaker John Boehner said Friday there has been no progress in negotiations to avert the “fiscal cliff”, a combination of automatic tax increases and spending cuts set to take effect in January.
John Boehner said the White House has wasted another week and has failed to respond to a GOP offer to raise tax revenues and cut spending.
Barack Obama and John Boehner spoke privately by phone on Wednesday. John Boehner described the conversation as pleasant, “but just more of the same”.
Barack Obama said in his address that he stands ready to work with Republicans on a plan that spurs economic growth, creates jobs and reduces the national deficit.
He said he wants to find ways to bring down health care costs without hurting seniors and is willing to make more cuts in entitlement programs such as Medicare.
Florida Senator Marco Rubio said in the Republican response on Saturday that tax increases will not solve the nation’s $16 trillion debt. Only economic growth and reform of entitlement programs will help control the debt, Marco Rubio said.
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France’s Prime Minister Jean-Marc Ayrault has said that 9 out of 10 citizens will not see their income taxes rise in the new budget.
He has confirmed that there is to be a new 75% tax rate for people earning more than 1 million euros ($1.3 million) a year.
Jean-Marc Ayrault has not yet detailed how much taxes will rise for the rest of the top 10%.
It is one of the key policies in what he called “a courageous, responsible budget – a budget of conquest”.
France’s Prime Minister Jean-Marc Ayrault has said that 9 out of 10 citizens will not see their income taxes rise in the new budget
The government’s priorities were young people, training and cutting 10 billion euros from its spending, he said. This would demand an effort but would be fair, he added.
Official figures on Friday showed that French public debt had hit 91% of GDP between April and June this year.
It was 89.3% at the end of March, which was still well above the eurozone limit of 60%.
Jean-Marc Ayrault pointed out that debt had grown by 30% of GDP in the past five years and that the debt threatened future generations.
He also said that the budget would encourage small and medium businesses and that taking risks would also be encouraged.
In its first budget, the Socialist government repeated its promise to cut the annual deficit to the eurozone limit of 3% of GDP next year.
The deficit this year is expected to be 83.6 billion euros, which is 4.5% of GDP.
Jean-Marc Ayrault said that France was strong when it set itself ambitious targets.
But some analysts said that the targets were too ambitious because they assumed too much growth for the coming years.
They said that tax increases and spending cuts would make it difficult to achieve the 0.8% growth in 2013 and 2.0% growth in 2014 that are predicted by the budget.
