Portugal's Socialist government has a nagging pain in its flank as its left wing party colleagues continue to pressure the prime minister to make good on pre-election pledges, without regard to cost.
It is becoming clear that Prime Minister Antónia Costa’s original enthusiasm on grasping the reins of power has been somewhat tempered by financial reality.
Does he have a grasp of the finances or will this be another Socialsist Party highway to penury?
The key 2016 budget, which should have been completed last October and sent off to Brussels for review and comment, will make clear what Costa can and cannot achieve in his first year of government.
The PM has said only that a 'budget draft will be ready this week.'
Brussels was expecting the full version by the end of December 2015 and has been putting pressure on Portugal to at least send in a draft after the former Finance Minister deliberately missed the October 2015 deadline due to the general election on the 4th.
From an outsider’s viewpoint, Portugal was doing well under the previous Pedro Passos Coelho coalition government, despite turmoil on home territory with unemployment, savage social cuts and the insistence that people should stop evading taxes.
Much of this was flummery and window dressing but international confidence in Portugal did grow. Now, like the early morning mist, confidence is melting away and the delay in submitting the 2016 budget, rightly is making investors nervous.
Costa’s government already has approved new laws that raise salaries in the civil service, raise pensions, raise the minimum wage, reinstate four public holidays and cut an income tax supplement.
The government has calculated those changes will cost €1.2 billion in 2015 but without a budget, investors cannot see the net impact.
Costa has failed to buy back TAP, eradicate road tolls in the Via do Infante, stop oil exploration in the Algarve, and set a date to reduce VAT in restaurants, amongst other pledges.
Costa also promised to reduce the 2016 budget deficit from over 4% last year to 2.8% in 2016, arguing that by boosting the amount of money people have in their pockets through his tax cuts, the more they will spend in the domestic economy and hence boost domestic growth.
The concern is that the tax give-aways are quantifiable and the resulting benefits are guesses, and will be overstated in the budget.
Portugal's banking sector remains a worry with two rescues needed in two years, added to this is the theft of €2 billion from Novo Banco bondholders which someone will end up paying for, usually the taxpayer.
The government’s stated funding plan requires issuing €12 billion in bonds this year, what is unknown it the income side of the national accounts.
So, is it 'Costa del Cool' or 'Costa Packet?'
The sooner the budget is settled, the sooner everyone can get a grasp of what the targets are and work can begin.
Antóio Costa has said of 2016, that this will be a "demanding and difficult" year where public finances are concerned, but that the government will achieve its goals without sacrificing his pre-election commitments, including "turning the page on austerity."
