IVA to rise to 25% if Brussels’ insists on further Portuguese austerity

Following his impassioned speech on Tuesday declaring Portugal will “not accept to be condemned to live in poverty, a country of low salaries”, prime minister António Costa has let it be revealed that if push comes to shove, the PS government will increase IVA by two percentage points, from the current 23% to 25%.

This way, the “billion euro” haircut being demanded by Brussels will bypass the need to touch salaries or pensions, explains national tabloid Correio da Manhã.

Each percentage point increase will bring state coffers 660 million “with immediate effect” – leaving the left wing alliance that is keeping the government afloat intact.

But how such an increase would be seen by business leaders is another matter entirely.

For now, explains CM, the prime minister is sticking to his guns.

Costa does not believe the Plan B under demand from Brussels is needed anyway, and he will be using the fact that Spain has just been given ‘time’ to adjust its excessive deficit as yet another reason for European moneymen to cut Portugal some slack.

European Commissioner for Economic and Foreign Affairs Pierre Moscovici announced yesterday that Spain would be given a further year to adjust its deficit – which came in last year at a whopping 5.1%.

With Portugal’s ‘excessive’ deficit at 3.1% (not including Banif), this week hinges strategies.

Tomorrow, Thursday, will see the Council of Ministers convene to approve the country’s Stability Programme and National Programme of Reforms – both of will then pass to Brussels, for final ratification, at the end of the month.

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