council of the European Union
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Brussels calls for ‘commitment’ on budget in light of Portugal’s political crisis

“There are ways to move forwards” even in current confusion

The European Commission has today called for “commitment” from Portuguese authorities regarding the 2024 State Budget, given that in light of current political turmoil, the budget outline sent to Brussels in October could change, and this could delay the European assessment.

“The Portuguese authorities will need to be committed to understanding the current situation and planning how they intend to move forward with the budget process,” said Valdis Dombrovskis, the European Commission’s executive vice-president with responsibility for the brief: “An economy that works for people”.

Speaking at a press conference in Brussels after the meeting of European Union finance ministers, Dombrovskis said “we know that there are ways to move forward with the budgetary processes and also with the evaluation of these budgetary plans, even in the event of a planned or unforeseen change of government“.

Portugal – which was represented at the meeting by the secretary of state for finance, João Nuno Mendes – submitted its budget plan for 2024 to Brussels on October 16.

Every year, the euro countries submit draft budget plans to the European Commission, which are then assessed as part of the EU’s public policy monitoring and coordination process, the European Semester.

On November 21, Brussels will present the autumn package of the European Semester with assessments of the countries’ draft budgets for 2024, when it will evaluate aspects such as the growth of net primary expenditure, the withdrawal of energy support measures and public investment.

At a moment when hearings are underway in Portugal’s parliament on the budget, any delay in approval “could also postpone the EU executive’s appraisal”, explains Lusa.

In the budget outline submitted to Brussels, the government argued that it has “defined three fundamental priorities: more income, more investment and safeguarding the future“.

The text read: “In the field of income policies, [this document] incorporates a substantial reduction in personal income tax and ensures increases in salaries, pensions, social benefits and other direct support. In this area, it is undoubtedly one of the most ambitious budgets of recent years, as well as a budget that encourages private and public investment, namely in education, health, transport and housing, and that fosters the growth of the business sector, an essential component of competitiveness and economic resilience”.

The future of the proposal will now be determined by the decision of the president, Marcelo Rebelo de Sousa, (almost certainly later today).

The proposal can go ahead if the president decides to dissolve the parliament after the final overall vote, explains Lusa (meaning if parliament is dissolved after November 29), but if parliament is dissolved immediately, the proposal falls and, until a new document comes into force, the country would be governed financially on a monthly budget execution limited to the amount of expenditure in 2023 divided by 12.

Also present at the press conference today, vice-president of the Spanish government and Minister for Economic Affairs Nadia Calviño, emphasised that, as far as the Recovery and Resilience Plan is concerned, the experience of the political crisis in Spain shows that “the pace of implementation has not slowed down at all over the course of 2023″.

The Portuguese RRP amounts to €22.2 billion, including €5.9 billion in loans. With an execution rate of 17% this far, Portugal has received €4.07 billion in grants and €1.07 billion in loans to date.

Source: LUSA