But then comes ECB’s hike in interest rates…
Portugal prime minister António Costa opened the two-day debate on the government’s 2023 State Budget yesterday promising:
- Economic growth above the EU average until 2026
- Stability, confidence and commitment
- Convergence with the EU
- More social justice
He stressed the main objective of his government is to “guarantee that every year the country will be growing above the European Union average, getting closer every year to the most developed countries in Europe”.
Opposition parties then proceeded to attack the plan, saying it will leave citizens worse off than they already are – which to a large degree is inevitable.
Agreements the government has forged with syndicates over workers’ pay do not (and cannot) keep pace with inflation.
But as the PM was reinforcing the fact that “successive increases in interest rates do not contribute to the control of inflation”, the ECB in Frankfurt announced another increase in interest rates, threatening more to follow.
In other words – and just as all the pundits have been predicting – the sums behind this budget have been set on a moving morass of uncertainties. No one really can tell what will happen next.
The only certainty is that the cost of living crisis is not going away any day soon, and this winter/ next spring will be “very difficult” (in the words of economy minister António Costa Silva)..
The PM has also opened the way to ‘windfall taxes’ – not just for the likes of GALP which has made bumper profits this year, but supermarket and hypermarket chains.
These, newspapers counter, will almost certainly retaliate by increasing prices to the consumer, compromising any benefit from the tax …
This morning, the debate continues with the final voting – guaranteed to see the budget pass – taking place around midday.
Not one of the opposition parties will be voting with the government – the two ‘closest’ parties LIVRE and PAN (both with only one MP apiece) already announcing they will be abstaining.
And the cherry on the cake appears to be the fact that former environment minister João Pedro Matos Fernandes has ‘cost the country’ €218 million in a decision he took in July 2019 NOT to compensate EDP for scrapping the construction of a dam for which the company had pre-paid this amount.
The court of arbitration has ruled that EDP is perfectly entitled to this reimbursement – and thus the State Budget has to ensure €218 million is paid to EDP.