Eurozone leaders are set to agree on a "competitiveness pact"

Portugal announced new spending cuts on Friday to try to restore confidence in its finances ahead of a euro zone summit that is likely to back a plan to boost competitiveness but defer decisions on a stronger rescue fund.

A German government source said there were positive signals that Greece and Ireland, which received EU/IMF bailouts last year, might also announce new moves at the summit, opening the way for EU paymaster Germany to offer them more help.

Eurozone leaders are set to agree on a "competitiveness pact"

The euro, which suffered its biggest one-day fall against the dollar in a month on Thursday, hovered near a one-week low and the yields on Greek, Portuguese and Spanish bonds remained elevated amid growing doubts that leaders can bridge differences on how to solve the region's fiscal woes.

The slow pace of European crisis management has heaped pressure on Portugal to seek an EU/IMF bailout, as Greece and Ireland were forced to do last year. But Prime Minister Jose Socrates has resisted saying it would be a national humiliation.