Minister of Finance Vítor Gaspar presents the results of the international lenders’ fifth mission of assessment of Portugal’s bailout programme this Tuesday. New austerity measures could be announced for the 2013 state budget, but there is a possibility of more flexible deficit targets.
Portugal’s Minister of Finance Vitor Gaspar will hold a press conference this Tuesday at 3pm to present the fifth assessment report of the country’s bailout programme. The possibility of new austerity measures looms over a frail Portuguese economy, but changes to the bailout goals could be on the way.
Officials from the European Commission, the European Central Bank and the International Monetary Fund – the so-called troika – have been in Lisbon for the past two weeks reviewing the progress of Portugal’s €78bn bailout programme. The international creditors have been faced with the fact that the government’s performance will overshoot the budget deficit targets. As a result, there will be either more austerity included in the 2013 state budget, or the lenders will introduce more flexible targets.
Portuguese daily Público writes that the Portuguese government may have earned a new set of deficit goals with the measures announced by Prime Minister Pedro Passos Coelho on Friday, long desired by the troika.
As reported in late August by financial newspaper Diário Económico, the international inspectors might choose to ease budgetary targets by allowing the deficit to overrun “slightly over 5%“.
International analysts also state that Portugal needs new goals. Speaking to PDV, Nicholas Spiro, managing director of Spiro Sovereign Strategy, said Portugal‘s lack of growth, its fundamental problem, should be addressed through more flexible deficit targets: “The key for Portugal is to preserve credibility, which means a sensible and credible medium-term plan for reducing the deficit”.
About today’s press conference, Diário Económico quotes Portugal’s Deputy Minister and Minister of Parliamentary Affairs Miguel Relvas as saying “the minister of finance will address the country about the 2013 budget and measures which are necessary”, hinting there will be more austerity.
Unions, opposition parties reclaim end to austerity
Portuguese unions and opposition parties met with the troika officials during their quarterly assessment of the bailout, expressing concerns over the toll the government’s austerity drive has taken on the economy and the people.
Communist-backed trade union confederation CGTP told news agency Lusa, prior to meeting with the officials, it would ask the troika to revoke changes to the labour code and extend the time the unemployed had the right to dole payments. While recognising there was a need for adjustments in the Portuguese economy, the international lenders often stated that the austerity programme was the responsibility of the government, not theirs.
Meanwhile, the main opposition party, the Socialists, also met with the officials and said the troika had “proof” that the economic situation and unemployment levels in Portugal were worse than had been expected at the beginning of the financial assistance programme.
Speaking after a one-hour meeting with the troika representatives, Socialist MP Pedro Marques said these quarterly meetings were designed to “adjust the bailout to the current situation”, but added it was the coalition government’s job to make any necessary changes to the 2013 budget to improve the situation.
Portugal’s unemployment rate reached a record high 15% in the second quarter of 2012.