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EU approves Portugal budget despite concerns

The European Commission on Friday approved Portugal’s draft budget for 2016, but warned that more efforts would be needed by the socialist-led government to avoid a breach of EU rules on spending.

The Lisbon government that took office in November risked an unprecedented rejection of its behind-schedule budget plans by the EU’s executive, but several days of tense negotiations in the end bore fruit.

“Following intense technical and political contacts, the Commission did not have to request a revised draft budgetary plan from the Portuguese authorities,” Commission Vice President Valdis Dombrovskis said at a news briefing.

“Nevertheless, the government’s plans are at risk of non-compliance with the rules of the Stability and Growth Pact,” he added, referring to the EU’s strict rules on government budgets.

In the wake of the eurozone debt crisis, the commission in 2011 gained new powers of oversight over EU budgets, with the added ability to outright veto spending plans by eurozone countries found in serious violation of the rules.

The EU caps deficit spending at 3.0 percent of GDP and public debt at 60 percent of output. Most of the eurozone’s 19 members break the limits, but negotiate a timeline to meet the rules with the commission.

“The road with our Portuguese friends is still long and steep,” said Pierre Moscovici, the EU’s Economics Affairs Commissioner.

The Socialist Party-led government took office in November and submitted its budget to the EU months behind schedule following inconclusive elections in October.

Portugal received a massive international debt bailout in 2011 that saved it from defaulting, but in return the country had to introduce a string of austerity measures.

In four years, more than 78,000 public sector jobs were cut — more than 10 percent of the total 650,000 — alongside other steps the creditors said were needed to return the public finances to balance and put the economy back on track.