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		</div><p><a href="http://londonglossy.com/wp-content/uploads/2011/01/portugal-reaches-deficit-target.jpg"><img class="alignnone size-full" title="Portugal lowered its budget deficit to the targeted 7.3% of gross domestic product last year" src="http://londonglossy.com/wp-content/uploads/2011/01/min-portugal-reaches-deficit-target.jpg" alt="Portugal lowered its budget deficit to the targeted 7.3% of gross domestic product last year"/></a></p>
<p>The financial crisis engulfing Portugal showed no signs of abating as its borrowing costs surged again, even though it lowered its budget deficit to the targeted 7.3% of gross domestic product last year.</p>
<p>Portugal is scrambling to correct its fiscal policies amid market fears that it will not be able to meet its debt obligations and will need a bail-out like Greece and Ireland.</p>
<p>The country&#8217;s high debt load and economic frailty have made investors reluctant to lend money unless they are given a high return for their risk. But markets are also worried that Portugal may not be able to afford the high cost of its loans amid a predicted downturn stemming from a debt-reducing austerity programme.</p>
<p>Market nervousness about Portugal showed up again on Thursday when the yield on Portuguese 10-year bonds rose to 7% &#8211; matching a euro-era record reached last November &#8211; before falling back slightly. By comparison, benchmark German bonds were steady at 2.9%.</p>
<p>The yield rise did not prevent the government debt agency from announcing an auction of three and nine-year bonds next Wednesday. It said on its website it intended to raise at least 750 million euro (£631m) and as much as 1.25 billion (£1bn).</p>
<p>Portugal raised 500 million euro (£420m) in a Treasury bill sale on Wednesday but had to accept a steep increase in interest rates to entice investors who are demanding a higher premium to risk their money on more indebted countries.</p>
<p>The average interest rate of 3.7% was close to twice the 2% rate Portugal paid on similar bonds in September and was way up from the 0.6% it paid a year ago.</p>
<p>The government has repeatedly ruled out a bail-out, saying it does not need help to contain the debt crisis and restore economic health.</p>
<p>Secretary of state for the national budget Emanuel Augusto Santos said Portugal met its deficit target of 7.3% last year. Portugal&#8217;s deficit in 209 was 9.3% &#8211; the fourth-highest in the eurozone. The government is aiming for a deficit of 4.6% this year.</p>
<p>A key factor in last year&#8217;s deficit reduction was Portugal Telecom&#8217;s transfer of its 2.8 billion-euro pension fund &#8211; equivalent to around 1.6% of GDP &#8211; to the state treasury.</p>
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