BRUSSELS (MNI) – The International Monetary Fund would consider
adjusting the fiscal targets attached to Portugal’s bailout loans if the
external economic environment were to weaken significantly, the deputy
director of its European Department said on Wednesday.

“If there is a major deterioration in the external environment that
really hits home badly in Portugal, then I don’t think one can blindly
say we need more fiscal adjustment,” the official, Poul Thomsen, said in
a conference call with journalists. “We need to keep an open mind about
reviewing it.”

The IMF on Tuesday issued a report on Portugal that said the
country was “broadly on track” with fiscal and structural reforms needed
to restore a healthy budget and boost growth, but it warned that “rising
stress in Europe is a serious risk.”

The IMF said it expected Portugal’s economy to shrink by 1.6% in
2011, a somewhat milder contraction than previously expected.

Nevertheless, the IMF cut its forecast for GDP in 2012 to -3%,
reflecting the impact of tough austerity measures and a weaker
international economy.

–Brussels bureau: +324-9522-8374;

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