LISBON: Portugal’s parliament approved the country’s 2016 budget in the final reading Wednesday, following months of wrangling with Brussels over the deficit goals and lengthy political debate between the ruling Socialists and their far left allies.
The Socialists and their allies in parliament, the Communists and Left Bloc, ensured 122 votes for the budget versus 107 opposed and one abstention, paving the way for the budget to take effect and deliver a promised rolling back of austerity.
This is the first ever budget in Portugal that wins the support of both the Socialists and the far left, who had traditionally been opponents because of ideological differences before they teamed up late last year to oust an austerity-minded center-right government.
The 2016 budget starts a process of gradually restoring public sector worker wages back to where they were before Portugal’s debt crisis and 2011-14 bailout, raises the minimum wage and also slashes value-added tax for restaurants to 13 percent from 23 percent.
“This budget aims to return hope to the Portuguese in a responsible way and to fully meet our commitments,” Finance Minister Mario Centeno told parliament. However, pressure from Brussels for more deficit cuts forced the government to find 900 million euros in extra revenues, mostly from indirect taxes on things like petrol, watering down some of the promises to give families more disposable income.
The European Commision has warned Portugal still risks breaking the bloc’s fiscal rules and asked Lisbon to prepare additional stand-by measures for a review in May. The budget is the culmination of months of political uncertainty which started with an inconclusive general election in October and resulted in a minority Socialist government taking over in November with backing from their far left allies.
The budget sees growth rising to 1.8 percent this year after 1.5 percent in 2015. After the insistence of Brussels, the budget deficit will be cut to 2.2 percent of GDP after 4.3 percent in 2015. The budget also foresees a slight decline in total debt to 127 percent of GDP from around 130 percent last year.
