Portugal’s Prime Minister has been spooked by his own covert policy of issuing positive messages about the economy through his ministers.
Passos Coelho now says that there is “not much room to relax fiscal consolidation,” putting paid to hopes that at last there might be some reduction of Portugal’s penal tax rates that have enabled the State to collect record amounts while continuing to waste it in sufficient quantities to negate any positive affect it would have had on the national debt.
The Prime Minister added for good measure that we all must “maintain a line of discipline and rigour" to fulfill his commitment to reduce the deficit.
The PM has been working with ministers on the State Budget 2015 and appears now to be backtracking along the lines of messages broadcast in the past few months that the economy is going well and tax receipts are at record levels sio tax rate reductions are on the way.
"I will not make any announcements about the proposed State Budget thatis to be submitted to Parliament... what I have said is clear, that Portugal does not have much scope to relax its fiscal policy, which essentially aims to reduce the public deficit."
Passos Coelho he was at an employment summit in Milan and had been quizzed about the fact that France and Italy have asked for more time to meet the budget deficit targets, so why not Portugal?
France says it can only meet the 3% public deficit goal by 2017, instead of 2015. Italy has a deficit below 3% of GDP, and is proposing to have a deficit of 2.8% in 2015, instead of the 1.8% agreed.
Portugal’s deficit, according to the PM, has been agreed and will reach the end of the year at 4% of GDP, adding that the path of deficit reduction is to continue, "this means keeping discipline and rigour in the coming years, not only in 2015."
The State Budget 2015 will have to be submitted to parliament before October 15, and this Saturday the Council of Ministers is to meet to discuss the proposals. With an election year coming up Passos Coelho needs to 'do a Dave ' and turn an entire section of the voting population to his side as did David Cameron in his lauded speech at the Conservative Party conference last month.
The way to do this is as old as democracy itself, people still vote through their pay packets so tax cuts are essential if the current PM wants to be the future PM.
Comments
..."so much of the Portuguese economy, would be in a far stronger condition if it had 'toughened itself up' in the last 30 years through allowing other EU nationals to - effortlessly and with positive assistance from the authorities - set up their competing businesses here. Both nationally, regionally and in every Concelho."
http://www.expatfocus.com/Forums/viewtopic/t=40456/
What is needed is a root and branch revolution in the way the Portuguese view their businesses. Costa the BofP Governor saying just the other day that 'much of Portuguese business is badly managed'.
Added to which so many of the top jobs go to people well connected - such as Barosso shoehorning his son into the Bank of Portugal a month ago - but not actually the best available for the job.
Having said all that; there really is a need for a root and branch revolution in Portugal .... Not the pretend, stage managed one of 1974. A 'revolution' in which the leadership 'fooled' the people that all was being changed.
Yet nothing relevant was.
Economic recovery in Europe is slowing, and Portugal´s performance is not helping.
I say again, one way to ease the pain would be a devaluation of the euro. But Portugal is no longer master of its own destiny, and must dance according to the piper´s tune, and it is the EU that pays the piper.
But, as always there is an elephant in the room.
The next Troika visit.
Any silliness detected in the budget, which after all will be scrutinised in Brussels - will then be published wold wide.
The problem as always though is in the grass roots. At Municipal level.
It is totally insane for such a backward country as Portugal to still be running with -Discretionary laws- for the Municipals. So, being optional, all Municipals are moving at different speeds, with different priorities and some even in different directions!
And the Portuguese elite have always had Discretionary Laws. Optional controls on their behaviour.
Why does Brussels keep sending just the one law over the Pyrenees ? Why not send something highly watered down that the elite just might buy into ?