Higher tax revenue than planned seems to be the key behind Portugal’s success in meeting last year’s budget deficit goal – and actually superseding expectations by an impressive €1.75 billion.
Last year’s IRS income tax was the highest ever, with Portuguese families paying out a whopping 35.5% more than they had in 2012.
Thus, the country narrowed its budget deficit (€7.15 billion) to roughly 5% of GDP, says parliamentary affairs minister Luís Marques Guedes.
The news is the best yet to show that Portugal is well on the path from fiscal austerity – but the fight is far from over.
Prime Minister Pedro Passos Coelho (pictured) still has to trim spending this year by €3.2 billion and hopes to narrow the budget deficit by 4% of GDP.
The master plan, as the country sets its sights on full access to debt markets at the end of the bailout programme in May, is to steer the budget deficit towards Europe’s 3% limit by 2015.
When one considers Portugal’s levels were at an alarming 6.4% in 2012, it is not surprising economists and ruling coalition party politicians are celebrating over this week’s news.
Meantime, French Finance Minister Pierre Moscovici said Portugal still may need a “precautionary” support package as the country exits its aid programme.
“We’re discussing that in the euro group,” Moscovici said today (January 24) in a Bloomberg Television interview in Davos, Switzerland. “The euro zone has gained stability and now we must re-create a sense of growth.”
