By INÊS LOPES [email protected]
On Tuesday, Prime Minister Passos Coelho said that it was “very possible” that a review of the country’s deficit targets would be discussed at meetings with the Troika (IMF/EU/ECB), who are currently in Portugal for the seventh evaluation of the €78 billion bailout programme.
Portugal may even be given a further year to fulfil its memorandum obligations as it is very likely it will miss its 2013 deficit targets.
On Friday, February 22, the European Commission published its Winter 2013 Economic Forecast and Portugal was one of the countries that stood out for all the wrong reasons – in 2013 the current deficit target of 4.5% will likely be 4.9%, the Portuguese economy will shrink 1.9%, instead of the predicted 1%, and unemployment will jump over the 17% mark in 2013 (from the 16.4% predicted last November) – see other story on these pages.
Despite the pessimistic EC predictions for Portugal, Passos Coelho reiterated this week that the government does not need more time nor money to fulfil its bailout programme. “We intend to conclude the financial assistance programme by June 2014, as had been envisaged from the beginning,” said the Prime Minister.
But as far as deficit targets are concerned, Minister of Finance Vítor Gaspar admitted last week that the government would be seeking more time, until 2015, to reduce its deficit to below 3% of GDP in order to ease spending cuts and tax hikes. But the deficit target of 4.5% would have to be hit this year, regardless.
The Troika officials have as main points of discussion during the seventh evaluation of Portugal’s bailout the €4 billion in spending cuts scheduled for 2014 and 2015 and a revision of the projected budgetary targets.
Ongoing discontent in Portugal over austerity measures is likely to worsen by Saturday, March 2, when a nationwide protest organised by anti-troika groups will take to the streets to say ‘enough is enough’.
It is predicted that the government will present a strategy, in other words more austerity, to reduce public expenditure by €4 billion over the next couple of years – €3 billion in 2014 and €1 billion in 2015.
The €4 billion goal is exactly the difference between the projected 2013 deficit (€7.5 billion) and the target for 2015 (€3.5 billion). But the government has a “Plan B” should the economy slip further and the likelihood of reaching the deficit target of 4.5% be at risk. Contingency measures could see around €800 million (0.5% of GDP) in savings being used to bring budgetary objectives back on track this year.
Speaking to Diário Económico newspaper this week, Eduardo Catroga, a former finance minister who was involved in the negotiation process for the memorandum of understanding on behalf of the PSD party, has warned that it will be “very difficult” for Portugal to achieve the 3% deficit target in 2015. With planned spending cuts amounting to €4 billion and strict deficit goals for the next couple of years, an eventual deficit slippage this year (without contingency measures) could not exceed €1.7 billion.
Although international officials, such as Christine Lagarde, president of the IMF, and European commissioner Olli Rehn, have shown willingness to review the deficit targets for Portugal should a gloomy economic outlook persist, no definitive decisions are expected for the time being.
Commission warns Portugal about deficit slippage, deeper recession and rising unemployment
Report||Economic forecasts by the European Commission announced last Friday in Brussels have confirmed the most pessimistic expectations for Portugal’s financial situation.
However, Olli Rehn, European Commissioner for Economic and Monetary Affairs, isn’t yet considering an extension to Portugal’s bailout deadline.
This year, the unemployment rate should go over the 17% mark, while the budget deficit will be 4.9% of GDP, more than predicted by the government (4.5%).
It is also predicted that the economy will contract by 1.9% in 2013, almost double the government’s predictions of 1%.
The national debt, instead of stabilising in 2014 as was predicted at the end of last year, will continue to grow over the next two years, according to the EC.
Portugal’s persistently high unemployment rate is a cause of concern not only to the government, with the Minister of Economy Álvaro Santos Pereira admitting recently that measures in place to fight rising jobless levels have proved inefficient so far (see other story on this page).
Bringing even more concerning news is the EC forecast that Portugal’s jobless rate may rise to 17.3% this year, almost a percentage point over the rate predicted last November (16.4%), although a decrease to 16.8% is expected in 2014 (the November prediction was 15.9%).
Regarding Portugal’s budget deficit, the Commission anticipates that the country will fail to reach its target limit, with the deficit likely to be 4.9% in 2013 and 2.9% in 2014 instead of 2.5% as negotiated with the Troika.
Reality is, any prospects for economic growth in the near future are dampened by these latest predictions.
However, the forecast for 2014 by the EC puts Portugal’s growth at 0.8%, the same level that had been projected in the autumn of 2012.
It is doubtful that Portugal’s public debt will stabilise in 2014. The EC reviewed the nation’s debt level upwards to 123.9% of GDP (instead of 123.5%) in 2013 and 124.7% in 2014 (instead of 123.5%).
Opposition
There’s no stopping Seguro
Portugal’s main opposition leader António José Seguro has been unstoppable recently, slamming the way the government is leading the country with its excessive austerity measures.
“What government is this? What are they doing? Enough is enough!”said PS leader António José Seguro during a mayoral event in Barcelos last Saturday.
The PS leader said he will not accept any more austerity and challenged Prime Minister Passos Coelho to participate in a debate organised by the Socialists, who want to share their alternatives for the country.
The politician said it was impossible to continue on the path set out by the government as the Portuguese have reached an “unsustainable situation”.
“The Portuguese cannot make any more sacrifices. We will not accept any further austerity measures, nor even a package of €800 million called Plan B (see main story on this page), nor will we put up with a €4 billion cut in State spending,” he said, adding that the country is “suffering” and that the Portuguese were being left behind in the path of austerity.
Seguro said the country needed growth and employment and criticised recommendations by the government that the Portuguese should emigrate to find better job opportunities.
He said it was unacceptable that Portugal had one million jobless people and no economic growth strategies on the horizon.
The PS leader believes the solution to budgetary consolidation is to renegotiate the bailout conditions with the Troika and request more time to pay the loan, and lower interest rates. Portugal will pay €7 billion in interest this year alone.
Unemployment
Action is “inefficient”
Economy minister Álvaro Santos Pereira has admitted that the measures in place to fight excessive unemployment in Portugal are not having much success and have not been communicated to the population properly.
“We are not being very efficient in the fight against unemployment, so we have to work on this,” he said last Friday during the second ‘Consolidation, Growth and Coesion Conference’, promoted by the PSD party in São João da Madeira. “We have to be humble and recognise this, but we also have to move swiftly to improve our actions in the fight against high unemployment,” he said.
“We are aware that many of our measures are not being explained properly to citizens.”
Revolution singing
As Álvaro Santos Pereira was about to enter the Paços da Cultura de São João da Madeira to attend the conference, anti-austerity protesters began singing the anti-fascist Revolution song Grândola, Vila Morena by the late Portuguese singer Zeca Afonso (also see story on page 8).
The group was not allowed into the venue and later the minister said it was only natural that the population was unhappy, at a time that the country was facing some of the most difficult times in living memory, with a record high unemployment rate and a large number of citizens emigrating and feeling demotivated about a future in Portugal.
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