A three-year agreement was reached for a bailout for Portugal, Prime Minister Jose Socrates announced late Tuesday, but the terms are harsh. Because of the stringent requirements and conditions attached to the 78 billion euro ($116.1 billion) package, an official source said Wednesday that the rescue was likely to push the country into a deep 2-year-long recession.
According to a Reuters report, Socrates, who currently holds his post as a caretaker, said that the agreement with the European Union (EU) and the International Monetary Fund (IMF) on the terms of the rescue package represented a victory for Lisbon. He explained that the agreement did not include some of the tough provisions that both Greece and Ireland had been saddled with in their own bailouts.
However, an official source was cited as saying that the austerity measures that were included in the bailout were so stringent that the rescue would bring a "contraction of 2% in gross domestic product in 2011 and in 2012." According to the source, higher taxes are in store on both property and cars, and deductions for health, education and housing will be reduced.