Portugal becomes first country to ratify EU budget pact

Portugal became the first EU country to ratify a European Union pact tightening budget discipline on Friday. The pact, the bloc's main rampart against debt crises, was approved by 204 votes to 24, with two abstentions. The assembly also approved as expected the European Stability Mechanism, a firewall fund and the second new line of defence against debt contagion. The pact, which specifies greatly increased rules on control of public finances, was signed in Brussels on March 2 by 25 of the EU countries after tortuous negotiations, but it was not signed by Britain and the Czech Republic. It will begin to be applied once it has been ratified by 12 countries. The new rules mean that almost automatic sanctions will be applied against countries which allow their annual budget deficits to breach agreed limits. It lays down a maximum structural deficit of 0.5 percent of gross domestic product, a maximum public deficit (including cyclical factors) of 3.0 percent of output, and a ceiling for debt of 60 percent of output. Portuguese Prime Minister Pedro Passos Coelho argued strongly in favour of the pact, saying it was important to help Portugal "recover the confidence of markets". Portugal is one of three eurozone countries to be rescued by the EU and the International Monetary Fund as alarm over the state of public finances pushed up borrowing rates on international bond markets to unsustainable levels first for Greece and then Ireland.