The unelected PM, António Costa
After just 2 months in office,
António Costa already appears to be
between the sword and the deep blue sea.
After several warnings from international agencies,
yesterday the UTAO showed what the Government had hidden:
cheating in the accounts of the 2016 budget.
In practice, this is what Mario Centeno, the Mininster of Finance did:
he took away from the structural deficit accounts,
all the measures the socialist-marxist-leninist government reversed,
from the 'austerity' measures implemented by the "troika"
after the emergency bailout of the recent years.
The UTAO concludes that this is a high risk budget,
which does not comply with the European rules.
And the Government is subject to be forced to change the budget draft
- or, at least, face EU sanctions.
In practice,
there are six risks, in this State Budget for 2016.
The European Commission has already sent a letter
to the Portuguese Government on the 26th of January,
asking for explanations about the reduction in the structural balance,
asking for more information and warning that can definitely forced
the budget to be fixed.
In the same letter, signed by the vice-president
of the European Commission for the Euro, Valdis Dombrovskis,
and the Commissioner for Economic Affairs, Pierre Moscovici,
Brussels reminds Portugal of the commitment it has,
with the Council of the European Union,
to reduce its structural balance
to 0, 5% already during this year.
Now everything depends on how the government will respond.
If the Commission considers that the objectives for the deficit
and the budget effort required, is not reached,
it could intensify the Excessive Deficit Procedure,
in which Portugal is already situated.
If Brussels considers that Portugal is in the category of a "default risk",
it can invite the Portuguese authorities
to take the necessary measures to correct this trend.
Worse would be,
if the Commission decides that Portugal was at risk of "serious infringements",
something, which Brussels incidentally, alluded to,
in the letter sent to the Portuguese Government, two days ago.
If this is the conclusion of the assessment,
the Commission has until Friday next week,
to prepare an opinion statement,
in which they would ask the Portuguese authorities
to review the budget and present a new proposal to Brussels.
Finally, Portugal may ultimately be penalized.
After being warned, the Commission
may impose a fine of 0.2% of the GDP
for violating the EU rules.
If the non-compliance continues,
the fines can reach up to 0.5% of the GDP.
There are changes in the fiscal rules,
with the entry into operation of the Budgetary Treaty,
which makes the application easier.
Now, instead of having the issue brought up,
and requiring a majority of votes to impose sanctions,
the non-compliance will automatically be brought forward
and only if there is a majority against the sanctions,
will they not be applied.
Portuguese law also requires revised budget
Not only the European Commission can ask for a revised budget.
In fact, according to the changes that were made, to the Budget Framework Law
(a superior force of law),
if a "significant deviation" is identified, over the medium-term objective
(which is the same, 0.5% of potential GDP),
the law dictates that the Government must present
a revised budget to the parliament.
In addition to reviewing the proposed state budget,
the government must submit a corrective plan
with the necessary measures to ensure that the objectives are met
and has 30 days to do so.
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