Portugal's core public deficit nearly tripled in the first two months of this year with tax revenues falling and spending up, showing the country has its work cut out to hit fiscal targets under its €78 billion EU/IMF bailout.

The gap widened to €799 million from €274 million in the same period a year earlier, when the deficit slumped by more than 70 per cent, the finance ministry's budget office said on its website late yesterday.

Earlier this week, finance minister Vitor Gaspar dismissed any suggestion that Portugal, facing its worst recession since the 1970s, is slipping behind the deficit reduction and reform timetable set under the bailout programme and ruled out asking for more rescue funds.

Many economists fear Portugal will follow Greece in requesting a new bailout, if not restructuring its debt. The government insists none of this will be needed.

The data showed state spending edged up 3.5 per cent to nearly €7.06 billion, which included transfers to public companies like the RTP broadcaster.

Revenues fell 4.3 per cent, which the authority attributed mostly to early dividend payments by companies at the end of last year instead of early 2012, when taxes increased.

Portugal's government has hiked taxes across the board and has been cutting spending to reduce its budget deficit as agreed under the bailout.

It met last year's deficit target of 5.9 per cent of GDP for the overall budget deficit, to a large extent thanks to extraordinary transfers of bank pension funds to state coffers, reducing the gap from 9.8 per cent in 2010. This year's goal is 4.5 per cent.

Portugal's benchmark 10-year bonds yielded 12.78 per cent in early trading today, slightly down from yesterday’s settlement level of 12.86 per cent after shedding almost one percentage point yesterday.

Reuters