Portuguese Finance Minister Vitor Gaspar, the architect of the country's reforms under its EU-IMF bailout, has resigned as the economy reels and social discontent mounts under the impact of austerity measures.

Treasury Secretary Maria Luis Albuquerque, who has managed the country's privatisation efforts, is to replace Gaspar.

Gaspar's resignation on Monday came as a surprise despite the country having struggled to keep to the terms of its $102bn EU-IMF bailout package and political and social opposition to austerity rising in recent months.

"Repeated slippages have undermined my credibility as finance minister," Gaspar said in his resignation letter.

Last week the national statistics agency reported that the country's public debt rose to 10.6 percent of economic output in the first quarter of this year as expenses rose while tax receipts fell. Portugal is supposed to squeeze the deficit down to 5.5 percent of GDP this year.

A former central bank adviser, Gaspar, 52, was the principal architect of Portugal's efforts to balance its finances which has included tax hikes, plus cuts in spending and state jobs.

The economy, already in recession for two years, is expected to contract by another 2.3 percent this year, under the impact of the austerity measures.

Meanwhile, unemployment is expected to rise to a record 18.2 percent, while over 42 percent of youths are already out of work.

Surprise departure

Political opponents have criticised Gaspar for blindly implementing the recommendations of the EU, IMF and European Central Bank under the May 2011 bailout deal.

Last week strikes against the austerity measures brought public transportation and flights to a standstill.

Gaspar acknowledged the unemployment rate, particularly among youths, was very serious and said it needs an "effective and urgent response on the European and national levels."

Gaspar also acknowledged his policies caused divisions within the government, and expressed hope his resignation would strengthen the government.

"This resignation is a surprise for Portuguese society, as it is for most of the political world," said political scientist Antonio Costa Pinto.

"It is the departure of the most important finance minister Portugal has had for decades," he added.

Source: Agencies