The minority Socialist government budget had already received the backing of parliament following votes in favour from the Socialist, Left Block, Communist and Green parties with the animal rights PAN party abstaining and the centre right Social Democrat and Popular parties voting against.
The president received the budget on 24 March and spent the weekend contemplating its contents that see the civil service austerity era wage cuts reversed over the course of the year along with the IRS tax surcharge. On the other hand there are hikes in a whole series of consumption taxes ranging from fuel duty to sin taxes on tobacco and drink.
Portuguese President, Marcelo Rebelo de Sousa, made a brief address to the nation to explain why he had signed the 2016 state budget into effect on Monday.
Compromise
“The solution arrived at is a compromise. It is within this framework of compromise that I took the decision to sign the state budget into effect,” said Rebelo de Sousa in his televised speech before adding that there were teo other fundamental merits.
The president explained that both the need for “certainties” in the lives of citizens and “the absence of any issues raising constitutional questions” were the other factors before explaining that the compromise extended to the deal reached between “the European institutions and social concerns focused on certain levels of Portuguese society” and that the “two different wills had come together” despite there being “reservations on behalf of both parties.”
“Indeed, this is not the state budget that the government would have preferred and nor is this the budget its supporting parties would have chosen and it probably is not even the budget that the European institutions would have proposed but politics is very much the art of the possible,” the president detailed.
Rebelo de Sousa added that it would only be through the rigorous execution of the budget that its eventual success or otherwise would be determined.
Prime Minister António Costa is on record as stating that households earnings will be 1.372 billion better off while the consequences of the tax rises amount to around 600 million euros.
Deficit
Independent budget experts working for Portugal’s parliament estimate that the public sector budget deficit last year, even before extraordinary items, was equivalent to 3.1% of gross domestic product - implying that the country will remain subject to excessive deficit procedures imposed on Euro-Zone members with deficits of more than 3%.
In a brief note on the national accounts for 2015, parliament’s Technical Budget Support Unit (UTAO) indicates that even after items such as the costly resolution of troubled bank Banif were stripped out, the 2015 budget deficit was 3.1% of GDP. In adjusted terms “the reduction of the budget deficit was 0.5 of a percentage point from 2014”.
The independent experts note that, “although the deficit showed an improvement from that recorded in 2014, this was not sufficient to achieve the objective budgeted for and will not allow the ending of Excessive Deficit Procedures”, since the deficit
is more than the 3% upper limit for euro-zone members.