Finance Council diverges Government and the Commission in the structural deficit – Jornal de Negócios – Portugal

Last year was a year of expansionary fiscal policy, the result of an increase in the structural imbalance of Portuguese public accounts confirms the Board of Public Finance (CFP), led by Teodora Cardoso, however, estimates that the degradation of structural balance – one that adjusts the accounts to the effect of the economic cycle and temporary measures – it was very slight and less than entered by the Government in the stability program and accepted by the European Commission on economic forecasts released this week. If the CFP is right, the government may face pressure to make a greater fiscal effort this year.

The reason for the difference lies in the amount of temporary fiscal measures considered by the various institutions in relation to 2015 . for the Government, last year’s accounts were negatively affected by the cost of resolution of Banif (1.4 points) and positively by recipes that do not relate to the year, highlighting a contribution of banks to the resolution fund. This was an assessment accepted by the European Commission, the forecasts published this week pointed to a deficit increasing by 1.2 points due to these temporary measures, as estimated by the Government. Already the CFP, in its analysis of the 2015 accounts, only considers the effect of Banif, explaining that the resolution fund revenue did not enter in the budget last year’s figures, it should not occur an adjustment.

Accounts made, all agree that the budget deficit last year was 4.4% of GDP; however, when you set this value to temporary measures, the CFP reaches a budget deficit of 3% of GDP, while Government and the Commission point to 3.2% of GDP. The difference also affects the value of the structural deficit of 2015: 1.8% of GDP says the CFP; 2% of GDP estimate Government and the Commission.

The difference is not innocuous. The change in the structural balance is one of the measures for evaluating the fiscal effort of a country, so it is different registration of an increase of only 0.1 points from 2014 as estimated the CFP, an increase of three tenths to take government and Brussels.

But there may also be implications for the 2016 fiscal policy if the structural deficit last year is lower than two tenths, this may mean that, compared to 2016, also disappears a reduction of that amount. It is recalled that in tough negotiations with Brussels in January and February the country avoided a return of the budget to Lisbon promising a structural adjustment between 2015 and 2016 exactly that amount. If the CFP is right, this adjustment may be, after all, a stabilization of the structural deficit between the two years. – Which would violate European rules

adjustment interruptions, says CFP
“in 2015, the budget deficit of the general government, in terms not adjusted, stood at 4.4% of GDP, exceeding the value set in the 2015 state budget (2.7% of GDP)” , write CFP technical analysis in the 2015 accounts published on Thursday, May 5, 2016, adding that “for this deviation mainly contributed to the Banif resolution operation with a negative impact equivalent to 1.4 percentage points GDP “, whereas” in adjusted terms of temporary measures and one-off measures (one-offs), the budget deficit decreased from 3.6% in 2014 to 3% of GDP in 2015 and the primary surplus increased from 1.3 to 1.5% of GDP. ” The CFP also estimates that “the structural deficit was 1.8% of GDP, thus interrupting the trajectory of improvement in recent years and represents an offset relative to the Medium-Term Objective.”

In the analysis the 2015 budget performance, the CFP points out that the deficit reduction was due exclusively to the increase in revenues – the tax burden reached a new high – despite the “revenue impact of the fiscal consolidation measures” have been “short than expected, especially in indirect taxes “evaluate the technical CFP, adding that” the expenditure side, fiscal consolidation measures do not seem to have produced the expected effects “, highlighting slippages in personnel expenses and intermediate consumption”.

positive note for the performance of social security with more revenue from social contributions and less spending, particularly on unemployment benefits, a budget surplus in 2015, “even excluding the extraordinary transfer of the State budget” .