On Monday 20 January the Euro area finance ministers asked the Portuguese government to consider taking, “in due course, the additional budgetary measures” required to ensure that the draft 2020 budget plan complies with European fiscal rules.
The European Commission believes that there is a risk that Portugal’s draft budget plan for 2020 may breach the Stability and Growth Pact by making provision for a lower than required structural budgetary adjustment (not including the cyclical effects) (see EUROPE 12404/15).
However, Mário Centeno, the President of the Eurogroup, discounted this theory. After the meeting, the Portuguese Finance Minister said that “I don’t expect to take measures but we’re always ready to take them if needed”.
Paolo Gentiloni, the European Commissioner for the Economy, praised the progress made by Portugal since the sovereign debt crisis forced it to seek financial assistance from the euro area in 2011. He noted that, for the first time since the return of democracy to the country, the national budget will record a budget surplus. Furthermore, although the debt is still high, it will continue to decrease, from 118.9% of GDP in 2019 to 116.2% in 2020.
Although the Commission has identified a number of “specific issues”, the risk for Portugal is “quite low”, said Gentiloni. The fact that the Portuguese authorities have not received a specific letter from the European Commission stands as testimony to this.
Klaus Regling, the Managing Director of the European Stability Mechanism, welcomed the significant improvement in the profile of Portuguese government debt securities in the financial markets. (Original version in French by Mathieu Bion)