(AFP) Rather than turn into a ghost town, one Portuguese village facing an exodus of young adults and dwindling birth rates came up with an answer: pay parents 5,000 euros for every new baby.

Sun-soaked Alcoutim in the southeast near the border with Spain has lost a third of its population over the last 20 years.

Its fertility rate, meanwhile, dropped to one of Portugal's lowest, at 0.9 children per woman, in a country whose national rate, at 1.21 children per woman, is already one of the lowest in the European Union - and now cause for national concern.

Portugal was hard hit by the global financial crisis and, as elsewhere, unemployment took a toll among Alcoutim's young people, forcing many to leave in search of jobs. Cash-strapped couples who stayed, meanwhile, put off plans to start a family.

So to kickstart a baby boom, local officials came up with a cash-for-babies scheme, offering 5,000 euros per newborn to help couples cover the costs of parenthood.

"These things are expensive," said Daniela Silva as she and her husband Nuno shop for their six-month-old son Santiago in the town's pharmacy.

With Daniela, 29, unemployed and Nuno, 37, on sick leave from his job at a retirement home, starting a family has been a struggle.

Eye ointment, a musical mobile and a playpen alone add up to 228 euros but the village allowance will cover the cost. "We live with my in-laws, with 800 euros a month," said Nuno. "The town's help is very important for us."

Cash-for-babies

Alcoutim's baby bonus is not the first of its kind in Portugal, but it is the most generous.

Set up in August, the scheme is modest in scale: six families are currently receiving payouts, which can be claimed up until the child's third birthday.

While still young, the project appears to be bearing fruit: nine births are expected so far this year, compared to six last year. Though far less than the 23 babies born in Alcoutim in 1995, it is nonetheless progress.

Mayor Osvaldo Goncalves' goal is to "attract young people" to the hilly, riverside town "because without young people, there are no children."

This age group particularly suffered in the financial crisis that forced Portugal to accept a 78 billion euro international bailout in 2011.

While its deficit is now under control and tourists are coming in record numbers, unemployment still stands at 13.7 percent - and amongst young people, that rate is a third.

Antonio, 34, and his partner Jessica, 22, were Alcoutim's first couple to benefit from the programme, which has covered most of their daily expenses for nine-month-old Martim.

"Formula, nappies and even the cost of day care, I paid nearly nothing out of pocket," said Antonio, who works at a youth hostel in town while Jessica works at the day care center. But even the 5,000 euros "would not be enough for someone who really has nothing," he said.

Precarious conditions

"Certain regions in the country, particularly in the central part, are not ideal for young people who want to work and start families," conceded Vanessa Cunha, researcher at the Portuguese Observatory for Families.

The economic crisis and austerity measures "left many couples in precarious conditions and postponing plans to start families," she said.

Portugal's slump in fertility rates is relatively recent, according to Eurostat, the EU's statistics office. Ten years ago it still stood in the middle of EU states, with 1.41 births per woman.

If the current decline continues, the country could lose 20 percent of its population by 2060, dropping from 10.5 to 8.6 million residents, according to the National Institute of Statistics in Portugal.

Lisbon's centre-right government has been watching the local "baby schemes" and recently put forth several bills in parliament designed to help young parents nationwide, with longer parental leaves, tax benefits and greater family allowances.

"The state heard the alarms set off by the smaller communities," said Mayor Goncalves.

But Cunha said these initiatives, while helpful, are not the ultimate fix for the dwindling population.

Birth rate incentives "won't be effective so long as the job market remains closed and uncertain," she said.