Christine Lagarde
Christine Lagarde is president of the European Central Bank

ECB warns Portugal: across-board crisis support could increase inflation

Study says support “does not respect 3-T rule”

Portugal’s support package for families and businesses is under scrutiny by the European Central Bank (ECB). 

The entity led by Christine Lagarde believes that the measure does not respect the “three-T rule”, according to a study released this week, which evaluates the State Budgets presented by 20 countries.

The ECB rule presupposes that aid is well ‘targeted, tailor-made and temporary’ (three ts). 

In the case of Portugal, the institution points to “risks of partial compliance” in the progress of deficit and debt reduction if energy-related support measures are not “discontinued as planned,” writes Dinheiro Vivo today.

According to the study, Portugal is mainly relying on transversal measures, which corresponded to 1.5% of GDP in 2022 and 0.9% in 2023. 

The ECB believes support should only be for families and companies in a more fragile situation to ensure that “budgetary policies do not increase inflationary pressures”, explain subsequent media reports.

The study also identifies Portugal as the “only country with very elevated debt that is in clear risk of non-compliance with European budgetary rules due to measures (adopted) for energy”, adds DV.

natasha.donn@portugalresident.com