In a speech at the British Chambers of Commerce, chancellor George Osborne said:
If you hear the stories about the cuts and still wonder why our country needs to take these difficult decisions, then look at what is happening around us. First Greece, then Ireland, today Portugal.
Portgual requested a €90bn bailout this week, which was greeted surprisingly calmly by the markets even though the European Central Bank raised interest on its loans by 0.25, meaning loan interest is now 1.25 per cent.
Shadow chancellor Ed Balls said that Osborne was "scaremongoring" and taking massive risks in policy which could put people's jobs and businesses in danger. He added that perhaps Osborne's policies are effective politically, but they are very bad in terms of economics.