Brussels says that lack of agreement on the Left, puts deficit at risk

Jean-Claude Juncker, President of the European Commision

The European Commission continues to doubt 

the foreseen deficit reduction of the Portuguese Government in the 2016 budget, 

assuming that there is a serious risk that the socialist executive 

would not be able to come to an agreement 

with its parliamentary radical left-wing parties coalition, 

if more fiscal consolidation measures were necessary.

In its specific report on Portugal, 

which acts as a warning mechanism of the macroeconomic imbalances 

within the European Semester, 

the Commission states 

that "there are downside risks of deterioration" 

of the budgetary prospects for this year.

At issue are the "uncertainties surrounding the macroeconomic outlook 

on possible expenditure overruns 

and the risk of no political agreement 

on further consolidation measures in 2016," 

says the European Commission.

In this report, Brussels takes into account the winter forecasts, 

published on 4 February, which foresees a deficit of 3.4% of GDP 

and economic growth of 1.6% this year.

Brussels points out that these estimates took into account 

still the budget draft plan , sent to Brussels on 22 January, 

and does not include "additional measures aimed at improving 

the balance of about 0.5% of GDP 

that the Portuguese government announced on February 5, 

"with the presentation of the state budget proposal for 2016 (OE 2016).

Between the presentation of the draft budget plan, 

sent to Brussels on 22 January, 

and the presentation of the State Budget (OE 2016) proposal 

to the Assembly of the Republic, 

the Portuguese Government had added many "erratas" 

and other measures, amounting of an additional 1,125 million euros, 

after negotiations with Brussels.

Thus, the Government revised its deficit targets 

and expects to stay within 2.2% of the GDP this year, 

and as for economic growth, foresees that the GDP will advance 1.8% in 2016. 

But the European Commission estimates the economy 

to grow by only 1.6% in 2016, and admits "less encouraging" risks, 

on this perspective, which are related to 

"the nature and the pace of deleveraging of the portuguese households 

and, especially of commercial companies".

It also pointed out the political risks: 

"The political uncertainty may increase the risk premiums 

and lead consumers to postpone spending 

and businesses to delay investment." 

Political risks, especially, the unrealiablity 

of the socialist-marxist-leninist radical coalition, 

poses serious risks for the future of Portugal.

In their frenzy to do as much as possible in reverting, 

reversing and cancelling, previously established agreements 

and contracts, chasing away foreign investors, 
these radicals are now considering, 

nationalizing banks to control all financial operations in Portugal,
as well as restructuring the foreign debt, 
which would come to another international bail-out programme.

We have seen this filme before:

In the Soviet Union, 

and the outcome has been as disaster!!