Brussels has warns that Portugal is in danger of failing to stick to the financial plan agreed under European rules and recommends imposing a cap on expenditure which could scupper the government’s plan to raise State employees’ wages next year.The European Commission has demanded that Portugal's government takes another look at its proposed figures for next year, specifically it is concerned that primary expenditure will break through the agreed barrier.
Brussels wants Portugal’s public accounts to fall in line with the primary expenditure limit of 0.6% of GDP, in accordance with European budgetary rules.
‘Net primary expenditure’ is government expenditure excluding interest on debt, expenditure on European Union programs covered by European funds, and non-discretionary changes in expenditure on unemployment benefits.
The Commission wants to ensure that Portugal is planning for some improvement in the accounts and is not taking advantage of the growth of the economy to slow down its efforts.
The Commission also called for "a tightening of expenditure control, cost-effectiveness assessment and adequate budgeting, particularly in the health sector with a focus on reducing late payments in hospitals," and wants measures in place to improve "the sustainability of public enterprises."
These warnings come during the 2019 State Budget discussions, with Portugal's various political parties propping up the António Costa socialist government making different demands.
One of the most frequent call is for wage increases for public sector workers but if Brussels imposes its spending limit rules, the chance of any wage hike is minimal.
The European Commission also warns that Portugal’s government is not taking into account, "potential measures to support banking (specifically, Novo Banco) that could increase the deficit from 2019 onwards."
