LISBON (Reuters) - Portugal's prime minister insisted on Tuesday there will be no veering off the strict terms of the country's EU/IMF bailout as the economy shows signs of nearing a turnaround after a long, deep recession.
Pedro Passos Coelho was speaking to parliament before a symbolic vote of confidence in his recently reshuffled government, aimed to show that the ruling coalition has put a rift over austerity policies behind it. The center-right administration has a solid majority in parliament.
Some investors fear the re-jigged government may be less amenable to further budget tightening to meet its bailout goals, but the premier reaffirmed his commitment.
"There are 10 months left of the assistance program, full of challenges and tough choices. But it certainly isn't now that we will falter," Passos Coelho said, also promising to deepen the reform of state spending as agreed under the bailout.
"There are growing positive signals in the economy that we may be very close to the turnaround that all the Portuguese want," he said. The economy is still in its worst recession since the 1970s and the government expects it to shrink 2.3 percent this year before returning to slim growth in 2014.
Although the government has also promised to promote growth by lowering corporate taxes, the premier warned the country has to take a gradual approach in any fiscal reform due to its European commitments that go beyond next year's planned exit from the bailout program.
"We don't have budgetary margin ... to accommodate a corporate tax reform in just one year," he said.
The ruling center-right coalition narrowly avoided a breakup this month by striking a deal giving its junior partner more clout in the cabinet, averting a renewed spiral in the euro zone's debt crisis.
(Reporting By Andrei Khalip and Daniel Alvarenga, editing by Shrikesh Laxmidas/Ruth Pitchford)
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