Costa tells people to stop smoking, reduce credits and take public transport

Despite some calling the Socialists’ State Budget – finally agreed by Brussels – a “gigantic increase in taxation” and a veritable “Frankenstein” of measures that will certainly see the man-in-the-street worse off than before, prime minister António Costa has given things a different perspective.

If people “stop smoking, take public transports and reduce their levels of credit”, they will escape with more money in their pockets and be free to spend it stimulating the economy.

It is not a popular explanation – and has seen leader writers of all hues rushing into print predicting nothing but pain.

Popular tabloid Correio da Manhã explains that the “austerity of Costa has nothing to do with that of the government of his predecessor”. It has “different targets” – among them, the banking sector. But these “will have a way of making sure they cover their new costs by way of commissions, or something else” passed on to the consumer, considers invited commentator Luciano Amaral, and thus no-one appears convinced 2016 will be any easier.

The budget “brings an increase in real earnings for the majority of Portuguese”, concedes CM in its day-to-day roundup on Monday. There are measures like the “reversion of public sector workers’ salary cuts, the return of part of the IRS surcharge and solidarity complement for the elderly”, and these are “measures that make all the difference, marking a turnaround in the direction that had dramatically aggravated poverty and inequality”.

But – and there is much in this but – “along with all this there has been a brutal increase in taxation which penalises not only the banks and businesses, but also consumers”.

The PM’s advice to take public transport, give up cigarettes and cut-back on credit arrangements “seems good” but it may well backfire big-time on the nub of the Socialist plan: stimulation of the national economy.

Budget by numbers

Looking at the numbers, income from taxation this year is set to exceed €40 billion. That is 2.6% more than it did in 2015, writes CM.

But, at the same time, State spending is going up by 5.1%, translating into €7.3 billion more than it will be receiving, says the paper.

As Brussels’ vice-president of the community executive responsible for the euro Valdis Dombrovskis has made loud and clear, Portugal’s budgetary plan is “at risk of non-compliance with the rules of the EU’s Stability and Growth Pact”.
But, as economist and Euro MP Elisa Ferreira has countered on national Antena 1 radio, there are many risks – all of them worth taking if they are going to release Portugal from “stagnation, depression and lack of investment”.

With former PM Passos Coelho clearly champing at the bit for a return to power, he has gone on record saying he hopes the “house (meaning the country) is not on fire” when this happens.

In easy-to-understand figures, fuel (diesel and petrol) are going to rise by seven cents per litre, cigarettes too – by seven cents a pack – and cigars are to receive a 78% hike in prices.
With alcohol – beer particularly – also going up, the State hopes to bring in an extra €320 million without batting an eye.

Road fund tax (IUC) is also set to increase as are the charges on new vehicles (up by 15%).

Taxes on credits are increasing by 50%, and this is almost certain to stay in force until 2018, explains CM.

With the PSD (centre-right party) among the fiercest critics of the day, the bottom line of their ire is that what was supposed to give families more spending power (“in an imprudent way”) shows that this new government has in effect opted to give with one hand, and take with another.

Looking at the situation from a higher plane, economist and MEP Elisa Ferreira has stressed that the European Commission has transformed into “a form of technical secretariat” which has effectively lost sight of the need to rebalance countries strengths.

She told Antena 1 radio that it is an entity that today “leaves a lot to be desired” and which as a result of “very serious technical errors” is now an institution that has become more fragile.

The EC’s policies have ensured that recessions persist, she added.

Ferreira’s comments, in the context of growing anti-European feeling within Brexit campaigners in the UK, demonstrate the crucial juncture that the whole European project has reached – and may explain why Brussels is allowing Portugal’s “risky” budget through without much more than a few grumbles.

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