Portugal should not fulfill the goals of the structural deficit with which it committed itself with the European Union, although to ensure this goal in the Budget proposal, all because the Government decided to calculate the potential GDP in a different way from that send in the rules of the Stability and Growth Pact, says the Council of Public Finances, which estimated that the effort is worth half of the required.
That the Government does not agree with the way how it is calculated the potential GDP, key in the calculation of the structural deficit, is not new. Portugal is not even the only country to question these rules, as in march, along with seven other ministers of Finance of the euro zone, Mário Centeno signed a letter with a strong recommendation that the methodology be reviewed.
The Commission responded at the time, admitting that it would analyze the case (that is to do), but remembering that the methodology that is currently used, and with which these countries do not agree, has been adopted by all the countries.
The Government has been insisting on these changes and now, in the proposed State Budget that he sent to Brussels, has even decided to make the accounts on the basis of a different methodology, more favorable for the accounts of Mário Centeno, instead of using the one which oblige the european rules.
Who says it is the Council of Public Finances that, in an analysis of the proposed Budget of the State in 2017, made their own accounts and it is estimated that, in the light of the rules that are used by the European Commission, the adjustment that the Government says that it is worth the 0.6 percentage points are required, it is in fact half, that is, 0.3 percentage points of potential GDP (in the methodology of the CFP would be about 0.4 p.p.). So, if Brussels insists on his method of calculation, the Government may still have to make an adjustment that can be around 570 million euros (which corresponds to 0.3 percentage points of potential GDP).
The disagreements on the way of calculating the potential GDP led the European Commission to send a letter to Lisbon to ask for more information to the Government about the accounts included in the Budget of the State, and that does not beat the right with those made by the technicians in Brussels.
According to the european commissioner for Economic Affairs, the divergences would not be enough for the European Commission chumbasse the Budget proposal and oblige the Government to submit a revised version (decision will be known this Wednesday). The question will pass to the hands of the Finance ministers of the euro zone, since they were the ones who cancelled the penalty in Portugal and can now see the adjustment required in the exchange, of 0.6 percentage points, the not materialize.
This is not the first picks of the Government with the European Commission. In the first budget of this Government, from 2016, the Executive took the view, contrary to what had been done by the previous Government, that the impact of a set of measures that was to be reversed it would have an extraordinary impact in accounting terms. Or is that the end of the pay cuts and the elimination of part of the surcharge from income tax should not worsen the structural deficit.
The arm-of-iron led to intense negotiations which ended with the Government to give in and introduce more measures to offset the accounts that he had made – that instead of reducing the structural deficit showed a deterioration, as was the case for the indent in the reduction of the Unique Social tax for workers with incomes up to 600 euros gross, the reduction in the number of public employees and various increases in indirect taxes, especially on fuels and on tobacco.
At the time, the Commission has not accepted the argumentation of the Government on practically everything.
Budget restrictive to pay for the reversal of 2016
the pay Cuts, surcharge, 35 hours, VAT recovery… This set of measures seems to be already old, but the costs will only make you feel the full this year. And the result is: according to the Council of Public Finances, more than two-thirds of the measures that the Government says that it will take in 2017 will be to pay for the impact of these measures.
Why? Most of these measures have been applied already in the course of the year or in a phased manner throughout the year, as is the case of the reversal of the pay cuts that was being made quarter-over-quarter, or the reduction of VAT in catering from 23% to 13% which only happened in the second half of the year.
These costs will make you feel right now with all his strength, and, therefore, the measures that the Government says in this Budget that’s going to take to control the deficit in 2017 will be to pay for the measures taken in the past year.
To this is added another issue, which can be problematic, that is the nature of the measures that are being taken. According to the CFP, the largest part of the deficit reduction that if you want to do in the next year should happen "mainly from the favorable impact of measures of a temporary nature and financial gains", and expectations in relation to the growth of the economy that do not take into account enough uncertainty internal and external.
This warning appears after the election of Donald Trump in the United States, and with the backdrop of the negotiation for the exit of the United Kingdom of the European Union, which is expected to begin next year.
in fact, the CFP refers several times that the expected results for certain items have no explanation in the measures that are to be presented by the Government, and should be, in some cases exclusively, dependent on the economic growth, which, as we saw this year, it may not run as expected.
This high dependence of what will be the economic growth next year may put in question the various sections of the budget, in particular to the revenue of the State, and the goal in the general case not materialise the assumptions of the Government, to the point that the CFP consider it a risk to the budget.
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