Brussels, 21/11/2013 (Agence Europe) - The European Commission says that the Portuguese aid programme is still meeting its targets, but it public spending reductions will have to remain on track to remain with the deficit reduction target of 4% of GDP for 2014, it states in its report published on Thursday 21 November following the troika (European Commission, European Central Bank and International Monetary Fund) assessment mission in September.
The Commission points out that 2013 was marked by strong political tension and the series of rejections of austerity measures by the country's constitutional court, which the Commission says are potentially dangerous because they reduce the government's room for manoeuvre. The situation has cleared a little now, and the government is expected to achieve a deficit of 5% of GDP in 2013, as agreed with its lenders, but next year might be more difficult.
In order to meet the deficit criterion for 2014, the Commission says the measures contained in the 2014 budget will have to rationalise and update the civil service, make the pensions system more sustainable and finalise the cost-cutting in government ministries. Rigorous implementation of the budget will also be vital to ensure a successful exit from the aid programme, scheduled for June 2014. The Commission says the governing financing conditions have probably been damaged by the political crisis in the summer, when former finance minister Vitor Gaspar resigned.
The Commission points out that, after the “surprise” economic growth in the second quarter, the economy contracted by 1.8% of GDP in 2013 and is expected to grow by 0.8% in 2014. The labour market situation has stabilised in line with the economy - after unemployment hit the 17.6% level in February and March, it fell to 16.5% in August, with employment growing by 0.8% in the second quarter. The report warns, however, that the state of the labour market remains a major concern, particularly youth unemployment.
Lisbon will be receiving a new batch of aid, €5.6 billion (€3.7 billion from the EFSF and €1.9 billion from the IMF). (SP/transl.fl)