Portugal held legislative elections on March 17th, resulting in a conservative coalition government formed by the PSD (Social Democratic Party) and the PP (People's Party), which replaced the previous socialist government of António Guterres. Consistent with the election campaign, which focused on public finances, Prime Minister Durão Barroso's revised budget, which will remain in effect until December, has been ratified. This budget outlines a series of measures the government has presented to control state spending.
The aim of this corrective budget is to ensure that the public deficit does not exceed 2,8%, lower than the 3% limit imposed by the Stability Pact.
The measures are based primarily on: a) increasing the maximum VAT rate from 17% to 19%; b) eliminating the lowest interest rate on housing loans for young people (this type of loan represented 43% of total housing loans last year); c) controlling state financial transfers to municipalities and freezing their debt levels.
These and other measures are causing a great uproar as they will affect a considerable number of people, especially in the younger sector, in relation to housing credit, producing queues and rushes in bank offices, since the deadline for this type of credit ends on May 31.
Likewise, the elimination of the numerous public institutes created over the last 20 years, the criteria for which have not been explained by the Minister of Finance, Manuela Ferreira Leite, will result in layoffs for the first time in the civil service, triggering a chain reaction from unions that denounce the measure as unconstitutional. Today, May 21st, the newspaper "Público" prominently features the large number of public sector layoffs: 50.000.
The height of this heavy-handed approach to governance, as the opposition calls it, is manifested in the alleged takeover of the state television network, RTP, in which the government is accused of yielding to the interests of various national and foreign lobbies. The government argues that the company's annual operating costs are unsustainable (the accumulated debt of recent years has reached 300 billion escudos, all drawn from the state coffers). It should be noted that this debt also stems from the 120 billion escudos the state should have paid RTP for public service, and the previous year's costs of 60 billion escudos, not including severance payments. All of this has led to a series of debates within RTP that have culminated in clashes between the outgoing and incoming ministers, while in the streets, RTP employees have been holding protests over job insecurity. In reality, state television is a very complex company that over the years has grown and created several regional, national and international channels, thus providing a public service by broadcasting programs that promote the language, culture and national values.
It is anticipated that this issue will lead to an initial confrontation between the government and President Jorge Sampaio, with the opposition betting on a presidential veto of the aforementioned measure.
In conclusion, The Economist magazine, in its May 11th edition, published a two-page promotional supplement on the Portuguese economy entitled "Portugal Update," which mentions an ICEP study in which Luis Moura, responsible for foreign investment, using the same statistical figures with which the Government dramatizes the economic situation in Portugal, demonstrates that the country grew for a decade above the European average, has one of the lowest unemployment rates in the EU, foreign investment is strong, more than 400 million euros have been invested in highways, the TGV is planned, etc.
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