■ The Socialist Party managed to win the parliamentary support of the far left parties only by agreeing to a major easing of fiscal policy.
■ The government then had to propose corrective measures before the European Commission would validate Portugal’s budget proposal on 5 February.
■ Even so, Portugal remains under tight surveillance. With its new fiscal priorities, the government will not be able to meet the Commission’s structural deficit reduction targets in 2016.
Portugal’s budget proposal of 22 January failed to convince the European Commission, which found the government’s growth assumptions to be overly optimistic. The Commission also disagrees with the government’s estimate of the structural balance. On 5 February, the European Commission finally accepted Portugal’s 2016 budget proposal with reservations, after the government agreed to make changes to the proposal presented on 22 January. Even so, Portugal remains under tight surveillance. With its new fiscal priorities, the Socialist government will not be able to meet the Commission’s structural deficit reduction targets in 2016.
No government, no budget
The European Commission’s recommendation comes much later than usual. Each EU member country was supposed to submit its 2016 budget proposal before 15 October 2015 to give the Commission time to assess whether or not it complies with European fiscal rules. Yet with Portugal holding general elections on 4 October, the Commission granted the country extra time to present its proposal.
The complications of forming a new government further delayed the filing of a budget proposal with the European Commission. The new government did not take power until 26 November. Coming in second behind an alliance comprised of the Popular Party and the Social Democrats, the Socialist Party had to negotiate long and hard before winning the support of the other left-wing parties1. In the end, it managed to win the parliamentary support of the United Democratic Coalition, comprised of the Portuguese Communist Party and the Greens, as well as the radical Left Block (which will not participate in the new government), but only after agreeing to a major easing of fiscal policy.
by Catherine STEPHAN