Portugal to present tough budget on October 15

Portugal should expect "messages" on growth and job creation along with hefty tax hikes in a 2013 draft budget the government will present next Monday, the country's prime minister said.

Pedro Passos Coelho told reporters on Monday that Portugal had to remain focused on cutting its fiscal deficit to meet targets under its 78-billion euro EU/IMF bailout in order to avoid having to seek additional rescue funds.

That meant it could afford no let-up in the budget to be unveiled to parliament on October 15.

"It's a difficult budget, the most difficult under the bailout," he said, denying rumors the ruling coalition was split over the tax increase, the broad outlines of which were announced last week.

"Deficit targets have been eased, but ... Portuguese should prepare for this difficult budget with a very significant increase in the tax burden."

Portugal's international lenders last month agreed to ease its deficit targets slightly and give the country more time to meet the goals. Next year's target is 4.5 percent of GDP, compared to this year's 5 percent.

Passos Coelho did not specify if the government planned concrete measures to help boost growth and employment, saying only that "aside from budget consolidation there will be very specific messages on growth and job creation".

The country is mired in its worst recession since the 1970s and the government expects the economy to shrink 1 percent next year after a 3 percent contraction in 2012.

He also said last week's bond swap -- the country's first foray into the bond market since before the May 2011 bailout -- was a good sign for the economy, companies and banks since it extended debt maturities and lowered financing costs.

Portugal is hoping to make a full return to debt markets after its bailout program ends next autumn.

(Reporting By Andrei Khalip and Daniel Alvarenga; Editing by John Stonestreet)