Portuguese budget slips as international auditors arrive
International creditor representatives were back in Portugal on Tuesday to check on its progress meeting budget targets that are proving elusive and might lead Lisbon to seek easier terms.
Like many heavily-indebted eurozone countries, Portugal is in an economic recession exacerbated by sharp budget cuts which took effect starting in May 2011 as Lisbon was granted a bailout worth 78 billion euros ($97 billion).
On Thursday, official figures indicated that the government would probably miss its target of cutting the public deficit to 4.5 percent of output this year unless it found ways to tighten the budget further.
Auditors from the so-called creditors troika of the European Central Bank, European Union and International Monetary Fund find themselves faced with the question of demanding more rigour or cutting Lisbon some slack.
They could also compromise at the end of a two-week visit by doing a bit of both.
“Barring any new measures, the deficit could reach almost 6.0 percent of GDP,” or gross domestic product, this year, analysts at the French bank BNP Paribas said in a research note.
They forecast that Portugal’s current fiscal targets would probably be amended, but that “given the size of the slippage, new targets could be accompanied by additional savings” measures.
Eurozone countries are supposed to run public deficits of no more than 3.0 percent of GDP, and to work towards a balance or even a surplus in times of economic growth.
Portugal is one of three eurozone countries now receiving international financial aid, along with Greece and Ireland.
Greece has managed to renegotiate terms of its bailout and Portugal could well try to obtain better terms now as well.
But as he finished his summer holiday, Portugal’s centre-right Prime Minister Pedro Passos Coelho insisted that the government’s finances would be brought under control and said the country was “closer to beating the crisis.”