Portugal's alternative austerity policy pays off
Remarkable news from Portugal: the new left-wing government that was harshly criticised by several EU partners when it first took over for renouncing the stringent austerity policy has reduced the 2016 budget deficit to 2.1 percent of the country's GDP. It has taught its critics a lesson, Portuguese commentators gleefully observe, but point out that the country still has major problems to deal with.
Lisbon teaches critics a lesson
Portugal has managed something that no one would have expected it to, Miguel Sousa Tavares comments enthusiastically in Expresso:
“Against all expectations Finance Minister Mário Centeno has met all his targets and taught all the pessimists in Brussels and Portugal who criticised the socialist government for renouncing the stringent austerity policy a lesson. … See, there really was an alternative after all! And even EU Commission for Economic and Financial Affairs Pierre Moscovici has had to admit - when he confirmed that the EU's prognoses regarding Portugal were wrong - that raising the minimum wage and boosting domestic consumption has had a positive impact on Portugal's overall economic performance. Nevertheless, Portugal's structural (and most pressing) problems continue: brutally high public and private debt levels, the collapse of its banking system as well as low productivity and investment capacity.”
Portugal not yet out of its mess
Jornal de Negócios is considerably less optimistic despite the positive report:
“The news that the deficit reduction target for 2016 was met is good, but still not reassuring for three reasons: Firstly, this result was achieved only thanks to extraordinary income (above all from tax equalization). Secondly, the socialist minority government has already frozen almost a billion euros in public investments. The third reason is more serious: Brussels has already confirmed that Portugal's structural deficit did not improve in 2016. … And this is the key indicator of the need to consolidate the state budget. It tells us whether the deficit won't shoot upwards owing to short-term fluctuations in the economy and exceed the three-percent deficit limit again. … What the numbers from last year clearly indicate is that there has been no structural change in Portugal's public finances. And that is definitely worrying.”