Portugal to ‘exit’ Europe’s excessive deficit stigma

European commissioners have this morning recommended Portugal’s exit from the ‘excessive deficit procedure’.

As we wrote this text, national media started reporting what is effectively the end of an eight year ‘stranglehold’ on government decision-making thanks to the country’s success in bringing the deficit down below 3%.

What happens next, however, is the big question.

As SIC reports, Portugal will “continue under observation” and be bound to continue to reduce its structural deficit.

It’s not all ‘good news’, explains Público, as the ‘ray of sunshine’ in being suddenly ‘more free’ – particularly from institutional stigma – means that alliance parties will start pressuring the government to satisfy their own political agendas.

“The Bloco de Esquerda and PCP are demanding more, and more quickly”, says the paper, suggesting that the first want more tax relief, while the communists will be pushing for an increase in pensions.

Ruling PS Socialists thus have a new ‘crisis’ on their hands as the country approaches municipal elections in October.

The trick, suggests Público, will be to keep all ‘alliance partners’ on board, without actually adopting any of their measures.

It will be a kind of “agreeing with measures” proposed by BE, PCP, the Greens and even PAN, without accepting any of their time-scales, says the paper – stressing that no new budgetary policies will be adopted this year.

The paper warns that “some economists believe that Portugal usually makes more mistakes when it is growing than when it is in recession” – reminding its readers that “the country woke up last week to a level of economic growth that it wasn’t used to, and the Bank of Portugal said on Friday that the economic activity indicator was accelerating as the country approached the three-month period of the year from 2.1% to 2.4%”.

Today’s recommendation – coming in Europe’s Spring Economic Forecast – will now have to be ratified by the European Council.

Also recommended for an exit from the excessive deficit procedure today is Croatia.

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