Finance minister, Mr Alvaro Santos Pereira, says the financial situation of many Portuguese transport operators is much worse than originally thought. "Public transport companies are in a very precarious situation," he says. "If we do not act, we will be unable to save them."

The plan envisages the closure of 250km of lines and the withdrawal of passenger services on a further 290km.

The Lusitania and Sud-Express international passenger services will be rerouted with the start of the new timetable on December 11, with passengers for Paris having to change at Vallodolid in Spain rather than Irun.

Lisbon Metro will merge with Carris, which operates the tram network, to form Lisbon Transport. Commuter trains operated by Portuguese Trains (CP) and Fertagus could also be merged into the new company. In Porto, the light metro and tram operators, Metro do Porto and STCP, will be merged to form Porto Transport. These two new city-wide operators will then be offered as concessions for five to seven years.

The government has also confirmed that no further contracts will be awarded for the high-speed project, although the planned line from Caia to Poceirão will still be built in a scaled-down form and without state funding as part of the national network.