‘Troika’ pressures to cut national insurance contributions

The International Monetary Fund/European Union/European Central Bank ‘troika’ has praised the Portuguese government’s agreement with unions and social partners over the new employment code.

It announced in Lisbon at the end of last week that the measures will promote growth, competitiveness and employment in the country.

However, the ‘troika’ has insisted that the government should reduce the share of national insurance contributions paid by Portuguese companies for their employees.

The ‘troika’ was in Lisbon for a conference on structural reforms which also counted on the presence of the Prime Minister Pedro Passos Coelho and the Minister of the Economy Álvaro Santos Pereira.

The Prime Minister admitted at the conference, which also included many academics and economists, that “many of our economic problems are of political origin”.

Pedro Passos Coelho said that Portugal was “doing these changes for us and not for you”, he said in front of the ‘troika’ members, adding that the reforms were “essential for the country”.

In a nod to the damaging effects of party political clientelism, jobs for boys and lobbying, the Prime Minister admitted that “too many times we’ve set one group against the other, fuelling a game of interests that has been damaging to all parties.”

The ‘troika’ criticised the fact that Portugal had not increased its “market share”, complaining that the country still had a “closed economy for its size”.

The IMF continued to insist that the Government needed to cut national insurance contributions (Single Social Tax) paid by employers for their employees.

The Government argued that it had been unable to do so since it didn’t have “room for manoeuvre” in terms of receipts.

The reduction on the table proposed by the IMF of eight percentage points would mean a loss to the Government of 3.4 billion euros in State receipts which would have to be made up for through tax hikes.

The Minister of the Economy discussed the problem of a justice system that was “too slow” and didn’t “help companies”.

Álvaro Santos Pereira revealed that the Government was working on the creation of mechanisms that would enable companies to file for bankruptcy and protect creditors by giving companies a second chance.

“The changes are fairly sweeping and represent a change in paradigm. Companies that are bankrupt would be given several months to restructure themselves, saving thousands of jobs.”

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