Fernando Medina’s first budget with a yellow sign from the European Commission


Finance Minister Fernando Medina’s first budget did not fully convince the European Commission, which sees risks on the expenditure side that could put pressure on the deficit and debt in 2023. At issue is “the extension of existing support measures and/or the enactment of new support measures in the face of high energy prices”, can be read in the assessment of Commission technicians, which “would contribute to greater growth in current net expenditure financed at national level and to an increase in the deficit and debt public policy projected for 2023”.

For heavily indebted European Union (EU) countries – such as Belgium, France, Portugal and Spain – the recommendation of Brussels (which does not, for the time being, issue an opinion in relation to Italy, due to the change of Government) is that “ensure a prudent fiscal policy”, in particular, “by limiting domestically financed primary current expenditure growth below potential output growth over the medium term”.

Now, in a context in which budgetary rules in the European Union remain suspended – they will only become active again in 2024 and should be reviewed by then – the Commission highlights that this recommendation is complied with in the cases of France, Greece and Spain, but not Belgium and Portugal.

In the case of the Belgians, the increase of nationally financed primary current expenditure is higher than medium-term potential output growth, while in Portugal, “is designed to be past”. Therefore, this increase in expenditure “risks not being in line with the Council’s recommendation”, emphasize the Commission’s technicians, also pointing out that, for Portugal and Belgium, the orientation of fiscal policy in 2023 is expansionist.

Thus, the Commission is of the opinion that the Portuguese budget “is not in line with the recommendations” that were made to the country in July, namely regarding the “increase in primary public expenditure” and that, therefore, it runs “the risk of being only partly in line with the budget guidelines”. This “assuming the planned reduction in measures in response to high energy prices, including temporary measures designed to support vulnerable households and businesses”. And Commission technicians warn that “the extension of existing support measures and/or the enactment of new support measures in the face of high energy prices would contribute to greater growth in current net expenditure financed at national level and to an increase in the deficit and public debt projected for 2023”.

The recommendation coming out of Brussels is for the Government to “take the necessary measures within the scope of the national budget process to ensure that the 2023 budget” complies with the recommendations and leaves alerts for support in the area of ​​energy, so that they are directed only to those who really need. “It is important that Member States better focus these measures on the most vulnerable households and exposed businesses in order to preserve incentives to reduce energy demand, and that these are withdrawn as pressures on energy prices ease. “.

The Commission also says that “little progress has been made on the structural side” of the budget recommendations and promises to reassess implementation in 2023.


Source: Expresso by expresso.pt.

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