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Finance Minister Vitor Gaspar confirmed the average income tax rise would increase from 9.8 per cent in 2012 to 13.2 per cent next year. Mr Gaspar said the budget was the only way for the country to meet its targets under the bailout. "We have no room for manoeuvre", he said. "Asking for more time under the bailout would lead us to a dictatorship of debt and to failure." He also announced spending cuts worth €2.7 billion next year, which would include laying off 2 per cent of the country's 600,000 public sector employees.
Mr Gaspar said the budget would allow Portugal to reduce its budget deficit to 4.5 per cent in 2013. It must eventually get its deficit below the European Union target of 3 per cent of GDP.
Portugal was granted a €78 billion ($100 billion; £63 billion) bailout last year.