Portuguese central bank says austerity has hit long-term economic potential

The Bank of Portugal's annual report for 2012 lays the blame for a 7.2% contraction in economic activity since 2010 at the door of the country's troika-imposed austerity programme, which has at the same time reduced the government debt to 6.4% of GDP, a reduction of 2.7 percentage points.

The report says the reduction in public debt is "particularly significant in a period when the cyclical position of the Portuguese economy is worsening", and notes that although it was brought about through