On the eve of the presentation of the draft State Budget 2015 scheduled for this Wednesday, the Government responded to the call of the European Commission to present further austerity measures with the announcement of the increase in the public deficit target of 2 5% initially forecast to 2.7%.
Was on the sidelines of a visit to the board of potters that Pedro Passos Coelho confirmed this Tuesday the news that gave account of an upward revision of the deficit target for 2015 “Over these three years, despite the recession, we managed to download 4 % and the deficit next year, we will reduce our estimate to 2.7%, “he said.
So far, the goal for the next was fixed at 2.5%, the value it had agreed between the Government and the troika . The Prime Minister, however, preferred to emphasize that “Portugal will exit the excessive deficit procedure in 2015″ and that this is “the first time in 15 years, which will have a deficit below 3%.”
Since 1999, when Portugal joined the euro, the governments repeatedly predicted in its proposals to lower budget deficits to 3% and, on occasion, presented preliminary data that pointed to that goal. However, further review of the data led to record deficits always higher than the barrier of 3% set by European fiscal rules. In 2007, before the global financial crisis, the deficit obtained was 3.1% of GDP.
To justify the decision to raise the deficit target, Passos Coelho said he “would not be consistent increase taxes . “
A few hours before this announcement by the Government, the European Commission published the final evaluation report of the troika program implemented in Portugal between 2011 and 2014 and made the conduct of fiscal policy by the Government target of their main criticisms and warnings
For 2015, a day before the government presented the budget proposal, the notice of Brussels was clear:. Portugal is wanted meet the deficit target of 2.5% next year , Portugal would have to put on the ground further austerity measures worth EUR 500 million.
The Commission makes calculations on what the country need to do to move from a deficit of 4% in 2014 ( not counting considered extraordinary expenses) to the 2.5% agreed with the troika . Firstly, the technicians of the European executive recalled that in May, when the program had not yet been completed, the Government and the troika estimated that measures equivalent to 0.8% of GDP would be needed (about EUR 1 400 million), with the remainder obtained through consolidation of economic growth.
Now, the European Commission says that the accounts are the same, but alert to the existence of a problem. Is that in May, the Government and the troika has not included in its forecasts that the Constitutional Court could hinder the new contribution of sustainability in pension and salary cuts in force in the civil service. As these leads were not the Constitutional fully compensated by the Government, the European Commission estimates that, now, the planned consolidation measures amounting to only 0.5% of GDP (€ 900 million).
“This implies that the government will have to specify additional measures in the State Budget for 2015 in order to achieve the agreed deficit target of 2.5% of GDP,” says the report of the Commission. So were missing measures worth 0.3% of GDP (€ 500 million). In addition, Brussels says the Government should find permanent solutions to temporary measures that applied in the past, as the surcharge IRS (which will again be present at OE 2015) and the Extraordinary Solidarity Contribution.
The option of the Government, instead of presenting new policies appear to be finally let the public deficit in 2015 skid, at least in part, against the initial target.
The question is whether this downward revision in the target already is negotiated with the European Commission to back this Tuesday, which published the report, to recall the existence of a commitment to Portugal to keep the deficit at 2.5% and not just below 3%, as defined by law for most European countries.
In response to the Public, official sources from the European Commission does not confirm the existence of negotiations to revise the deficit target, saying the statements made on Monday by Vice President Jyrki Katainen, where he was assured that they had no decisions on any proposed budget of the Member States yet been taken and that this only happen after the proposals are submitted to the Commission services.
