2010 State Budget consensus

The Portuguese government, after weeks of wrangling with opposition parties, managed to push its State Budget for 2010 through Parliament on Tuesday.

It did so by coming to an accommodation with the opposition PSD party, which has promised to abstain from voting against the government after its “essential concerns” were met by the PS governing party.

This year’s budget was threatened by a political crisis over the Regional Finance Law, which aims to cap the amount of money the government hands out to Madeira and the Azores, a proposal Madeira’s Regional Legislative Assembly was threatening to boycott. 

Instead, the government has agreed to allow a moderate increase in its annual grant, estimated in 2010 at 1.531 billion euros, and to up its debt capacity by 85 million euros while assuming 111 million euros of the region’s debt as well as promising some public investment projects for the area.

Even so, it is expected to get around 50 million euros less than in 2009.

The Minister of Finance, Fernando Teixeira dos Santos, said that 2010 could “expect a significant reduction in the deficit” which has been calculated by economists to go from 8.7 per cent in 2009 to 8.3 per cent in 2010.

The Portuguese government has also given assurances to Brussels that it will bring its annual State Deficit, in accordance with the Growth and Stability Pact, down to three per cent or lower by 2013.

That means that for three consecutive years, the government will have to shave two percentage points off the annual deficit or 3.3 billion euros a year, requiring more effort and pain from the Finance Minister than the cuts he had already made between 2006 and 2007.

Leader of the PSD opposition, Manuela Ferreira Leite, told the Finance Minister that the budget was “neither your budget nor your policy but a budget in the national interest.”

On Monday, she said that Portugal’s public finances were “a lot more worrying” than the public had been led to believe, but accepted that the government had “committed itself to measures to reduce public debt and control public spending”.

Other measures in the State Budget for 2010 include upping unemployment benefit by 20 per cent for unemployed couples, reducing VAT repayments from 60 days from July 1, 2010 and to 30 days from January 1, 2011, taxing bankers’ bonuses over 27,500 euros by 50 per cent, increasing tax debt payment date limits from 60 to 120 monthly instalments for debts over 51,000 euros and fixing public sector pay rises at 0.8 per cent.