Portuguese drivers have been crossing the border to fill up their vehicles in Spain where fuel can be as much as 36 cents cheaper per litre. Pictured: A driver at an Ayamonte fuel station last Sunday. Photo: LUÍS FORRA/LUSA

(Im)perfect storm – Portuguese government beset from all sides

Anyone who thought the arrival of Brussels’ ‘bazooka billions’ would start powering Portugal towards success will be looking in dismay at the events of the last week.

The minority government intent on leading the country out of the pandemic is suddenly beset by problems from all sides: the health service is ‘running on empty’ – scheduling strikes through November -, the transport sector is in meltdown due to the rising cost of fuel, and none of the ‘traditional allies’ that have supported the minority executive since 2015 seem prepared to vote for next year’s State Budget (OE 2022).

The budgetary dilemma is one thing – to a large extent being blown up to be ‘the crisis of the moment’. But, in reality, it is just a detail.

The much worse situation is the collateral damage of the fuel crisis – an issue that the government on its own can’t ‘fix’ by dint of the fact that fuel prices are soaring globally. It is a problem that will have different damaging effects in different countries, but here the urgency is in trying to bring things under control before the rise in transport costs is reflected in a rise in the cost of living.

As a country that imports so much of what it consumes, an increase in prices on top of the myriad social and economic impacts of the last two years would almost certainly rank as the last straw.

Media director Paulo João Santos wrote in an editorial on Wednesday, “it’s not the destiny of the budget that should be worrying António Costa and his government.

Even if the proposal is vetoed, there will be no drama, no crisis – just early elections where voters will indicate the path to follow. What is so much worse will be the social agitation likely due to the lunatic increase in fuel costs. It’s a spark the prime minister and his team has to extinguish rapidly unless it wants an explosion of discontent and dissatisfaction. Last week’s intervention (when the government reduced its tax grab by between one and two cents per litre) had little effect. Within two days, prices were going up again. It won’t be long before these successive increases are reflected in the price of consumer goods, making the situation unsustainable if nothing is done to reduce the weight of taxes on fuel products. And an energy crisis will be so much worse than a political crisis…”

The short, simple paragraph says it all: no matter what politicians tell us about the importance of political stability, the only importance to families is being able to afford to live. Portugal is already a country where one in four people are living in poverty: an increase in the cost of living in a system where already people are struggling to make ends meet, can barely access State healthcare, would turn that spark into a bushfire.

Thus, the real focus of attention this week should be on the government’s negotiations with truckers’ syndicate ANTRAM – not on its bargaining with the left-wing. And to that extent there is some hope.

President Marcelo Rebelo de Sousa has already intimated that a solution could be found, depending on Brussels’ say-so.

Right now, the government has ‘no margins’ (it says) to reduce taxes on fuel. These can only come with “agreements at a European level” and “depending on the gravity of the situation”, Marcelo told journalists on Monday.

But by Tuesday, PM Costa was already admitting there would be ways to juggle with margins, on a weekly basis, to try and keep costs from spiralling.

Outside the National Pantheon for the ceremony honouring Portugal’s wartime ‘hero consul’ Aristides de Sousa Mendes, Mr Costa explained that the State will start receiving more in the way of IVA due to increased fuel prices, thus “whenever there is an increase in IVA, we will proceed to return (this increase) through (further reductions) in ISP (the fuel tax that was reduced minimally last Friday).”

Adjustments will be made on a weekly basis, he said – stressing: “We are not going to finance fossil fuels. We don’t want to. The State does not want to amass extraordinary revenue due to this extraordinary increase.”

And on Wednesday, there were more chinks of light. Reports suggest truckers will be compensated for successive increases in the price of fuel by an ‘extension of the exemption of the IUC (road fund tax)’. This was one of the demands presented to the government when ANTRAM representatives met infrastructure minister Pedro Nuno Santos on Tuesday, in the company of secretary of state for fiscal affairs António Mendonça Mendes.

At the moment, transporting companies receive a 37% exemption in the cost of annual road fund tax. How much more could be lopped off will be up to the European Council, meeting in Brussels over the next couple of days, but ANTRAM’s leaders certainly appear to be a little more optimistic.

Among proposals the sector has presented to the government – beyond altering exemptions on IUC – are fiscal benefits to be awarded in the acquisition of ‘environmentally-friendly’ trucks and tax exemptions on ‘reinvestments’ when it comes to fleets.

Even so, ANTRAM lawyer André Matias de Almeida stressed that none of the measures in themselves will resolve the immediate problem of soaring fuel costs. “We continue extremely worried,” he told reporters.

Meantime, there is another sector looking at the developing crisis and in deep quandary: that of fuel stations. These businesses are threatening to ‘close their forecourts’ if the government reduces the tax on fuel again. An official source explained this side of the drama to Jornal i: “In €10, 60% goes to the State, 37% is in the hands of the fuel suppliers and around 3% goes to fuel stations, which, with this margin, have to pay salaries, rents and other costs. If the government tries to alter this 3%, we may as well close our doors as we won’t be making any profit.”

Jornal i adds that fuel stations have already been hugely impacted through the pandemic – not simply through a fall in demand for fuel, but by being banned from selling alcohol at their outlets (something that again contributed significantly towards profits).

All in all, it is not a week in which anyone would relish being ‘in charge’.

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