IMF report forces government to admit “more austerity is on the way”

Yet another damning economic report on the true situation in Portugal has slashed through media hype promoted in the run-up to October’s elections and forced the government to admit that a lot more austerity is on the way.

Intriguingly, however, it has remained up to foreign media to put the story into stark perspective.

“Indebted Portugal is still the problem child of the eurozone,” writes the Telegraph today, leading on “asphyxiating debt levels, falling job creation and bad loans”.

While newspapers here focus on the fact that the much-promised withdrawal of the unpopular “extra” (3.5%) IRS income tax is now increasingly at risk – with the IMF saying it may have to be delayed or partially cancelled – the UK’s rightwing national claims the way ahead rests in “a bold programme of deep spending cuts and tax hikes”, to be pushed through by an IMF that has little faith in the current government’s growth or deficit forecasts.

As the Telegraph points out – again, something very much glossed over by national papers – “Portugal continues to have the highest public and private debt ratio in the eurozone at over 360% of GDP”.

“Despite five years under a compliant centre-right government, progress on implementing structural reforms demanded by creditors has eased off, said the IMF.

“The country goes to the polls in October, where the anti-austerity Socialists are on course to win a parliamentary majority,” the Telegraph continues – again, a nugget with which readers (ergo voters) here are not being fed.

In Portugal, forecasts consistently point to the race for power being almost neck-and-neck.

Back on national soil, much is being made of the threat to the “extra” IRS tax, with the coalition doggedly maintaining it is the IMF and other international creditors who have got the whole thing wrong.

“We are totally confident in our estimates,” regional development minister Miguel Poiares Maduro told reporters.

But as the Socialist Party’s national secretary João Galamba explained, it is not simply international creditors that have poured cold water on the government’s estimates. Portugal’s own deficit watchdog UTAO did so only a few days ago.

“The IMF is simply joining the chorus,” he said yesterday as the report came through. “Just like UTAO, they do not believe the electoral propaganda of the government.”

[email protected]