Monday, October 24, 2016

UTAO. The budget is not enough to accomplish goals – Observer

A gap of more than a billion euros. Is the account that the technicians of the Technical Unit of Budget Support, the team of independent experts that works closely with the Parliament, makes between what the Government must do to fulfill the commitments with Brussels and what it proposes to do in the draft State Budget for 2017, according to the preliminary analysis on the proposed Budget to which the Observer had access to. To confirm, the Commission should invite Portugal to take further action, the technicians say.

"The discretionary measures of fiscal consolidation presented in the report of the proposal of the State Budget for 2017 and the Project of the Budget Plan may come to be considered"insufficient. It is thus that the technicians put the question. Worse: using as a basis the scenario of a policy invariant to 2017 of the Council of Public Finances, the European Commission, "the dimension of the measures underlying the State Budget for 2017 could point to a degradation of or in connection with the maintenance of the structural balance from 2016 to 2017, not complying with the budget constraint that Portuguese public finances are linked in the context of structural adjustment".

In the accounts of the technicians, so that Portugal complies with the targets with which they undertook with the Council of the European Union, or is, with the other 27 countries of the European Union, Portugal must reduce its structural deficit by at least 0.6 percentage points. This is the goal that is registered by the Government in the Budget, or is, supposed to be there measures for this to be done. But, according to the UTAO, are not.

Not only the measures are not there are, such as the difference in the face of that which is required is considerable. The UTAO says that to achieve the goal, the Budget would have to have the consolidation measures between 1.7 billion and 2.1 billion euros – 0.9% and 1.1% of GDP respectively -, but the discretionary measures included in the Budget do not reach even the 645 million euro, 0.34% of GDP.

this means that, at best, and while the accounts of UTAO correct, would be failing in the State Budget, more than 1000 million euros in budget consolidation measures.

even so, the Budget of the State may come to be regarded as, or "globally consistent" or "at risk of non-compliance" in the evaluation that the European Commission will give to know in the next week. If not enough, because it is not voted? The reason is legal. The Commission can only return the Budget to the Government and ask him for an improved version, if the reduction of the structural deficit is less than a difference of 0.5 percentage points compared to the goal that year. As this year Portugal has a target of 0.6 percentage points of GDP reduction in the structural deficit, it would be necessary that the fiscal effort would be less than 0.1 percentage points for Brussels to demand a revised version.

however, this does not mean that the conversation ends here. As recalled by the UTAO, in any of these cases, the "the European Commission will invite the authorities to take the necessary measures in the framework of the process of the national budget to ensure that the Budget will be in compliance with the SGP [Stability and Growth Pact]".

This was, in fact, what happened this year when the European Commission assessed the Budget proposal of the State for 2016. On 5 February, when the commissioners for the Euro, Valdis Dombrovskis, and for Economic Affairs, Pierre Moscovici, announced that the Commission had decided not to stopping the Budget, they also said that the Budget Portuguese had been regarded as being "at risk of non-compliance" and invited the Portuguese authorities to take more measures to ensure that the goals were met.

This request has been made for the measures to be integrated early during the discussion of the budget in Parliament, a concern reinforced by the Eurogroup after a week when required to the minister of Finance a contingency plan to ensure that the goal of the deficit was fulfilled.


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