Austerity measures for Portuguese economy continue in 2006

THE PORTUGUESE government is to continue its package of austerity measures next year to bring the country’s budget deficit under control. Presenting the annual state budget recently, Finance Minister Fernando Teixeira dos Santos said that no new taxes would be introduced, although existing and agreed taxes would remain in place.

The government now predicts an economic growth of 1.1 per cent, while admitting that unemployment could reach 7.7 per cent in the coming months. José Sócrates’ government had predicted in June that economic growth would rise from 0.8 per cent this year to 1.4 per cent in 2006. However, Teixeira dos Santos said that spiralling oil prices and continued economic recession in the Eurozone countries called for a less optimistic revision to that originally predicted. “To create a favourable economic climate for growth and employment is the objective of the 2006 state budget,” said the Finance Minister.

The government says that it will continue reducing public spending, promote long-term conditions of sustainability in social security, clean up and streamline the financial system, while continuing to chase up tax evaders. In practice, the government expects an extra 1,563 million euros from the sale of public interests in companies such as EDP.

With respect to the budget deficit, which this year reached 6.2 per cent and should be below the three per cent ceiling set by the European Union, the minister believed he could bring it down to 4.8 per cent. When asked how he would do this without raising taxes, Teixeira dos Santos said that it would be achieved through better and more efficient economic housekeeping and public spending cuts.

Other measures to improve the running of the economy included allowing computer related purchases to be tax deductible and changing the car tax rates by offering incentives to scrap fuel inefficient cars at the end of their lives. The minister predicted an increase in taxes on petrol products, leading to price hikes for energy, gas, petrol and diesel. Tobacco would also go up 30 cents a packet.

Parliament is expected to ratify the 2006 budget at the end of this month.