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Portugal's PM warns of more cuts

Portugal's prime minister has warned his country to prepare for deepening hardship next year as it struggles to climb out of debt.

Portugal is one of three eurozone countries that have needed financial rescue because of an unsustainable debt load.

It took a 78 billion euro (£68 billion) bailout in May, but despite a series of tax hikes and pay and welfare cuts, Portugal is coming up short on its debt reduction targets.

Prime minister Pedro Passos Coelho said in a televised address on Thursday that his government planned more pay cuts and tax increases in 2012.

He said: "We are living through a national emergency."

The new measures are to be included in the 2012 budget, due to be unveiled next week.

Meanwhile, Standard & Poor's has downgraded its long-term debt rating on Spain, citing the country's weak growth prospects and risks facing its banks.

The rating agency said Spain's economy had shown signs of resilience this year, but the country was still burdened by high unemployment, tight credit, heavy private-sector debt loads and prospects that its main trading partners would also stumble.

It cut its long term rating to AA- from AA. The outlook on the rating is "negative", which implies it could be lowered again at some point.

S&P, however, affirmed its short-term rating of A-1+ on Spain.

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