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European Commission - Press release

European Commission adopts Opinion on Portugal's 2016 Draft Budgetary Plan

Brussels, 5 February 2016

Commission invites authorities to take necessary budgetary measures

The European Commission considers that the Portuguese government's 2016 Draft Budgetary Plan is at risk of non-compliance with the provisions of the Stability and Growth Pact. In its Opinion adopted today, the Commission therefore invites the authorities to take the necessary measures within the national budgetary process to ensure that the 2016 budget will be compliant with the Stability and Growth Pact.

In the context of elections on 4 October 2015, Portugal did not submit a DBP on time by 15 October, but only on 22 January 2016. A preliminary analysis identified a serious risk of non-compliance with budgetary policy obligations and, in line with the rules, the Commission asked the Portuguese government to clarify outstanding issues.

Taking into account a) the Draft Budgetary Plan, b) further structural consolidation measures announced by Portugal on 5 February as well as c) additional information regarding the 2015 baseline, the structural effort planned by the Portuguese authorities for 2016 is now estimated to be between 0.1% and 0.2% of GDP.

Vice-President Valdis Dombrovskis, responsible for the Euro and Social Dialogue, said: "Following intense technical and political contacts, the Commission did not have to request a revised draft budgetary plan from the Portuguese authorities. Nevertheless, the government's plans are at risk of non-compliance with the rules of the Stability and Growth Pact. The Portuguese Government is invited to take the necessary steps to ensure that the 2016 budget is compliant. In spring, the Commission will reassess Portugal's compliance with its obligations under the Stability and Growth Pact, including under the Excessive Deficit Procedure."

Pierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs, said: "This is a good outcome for all concerned: Portugal, the Commission and the euro area. Without having had to request a revised draft budgetary plan, a constructive dialogue has led to additional measures worth up to €845 million, which will help safeguard the soundness of Portugal's public finances. The reassuring message to investors today is: the EU's fiscal framework is robust and the Commission welcomes Portugal's reaffirmed commitment to it. At the same time, the risk of non-compliance remains and we will continue to monitor developments in the coming months as part of the ongoing Excessive Deficit Procedure."

Portugal has been in the corrective arm of the Stability and Growth Pact since December 2009 and was asked to correct its excessive deficit by 2015, i.e. to bring the deficit to below 3% of GDP by 2015. For 2016, the Council recommended that Portugal make a fiscal adjustment of 0.6% of GDP towards the medium-term objective. According to Portugal's DBP and the Commission's winter forecast, the general government deficit is expected to have been 4.2% in 2015.

Background

Under the EU’s rules on fiscal policy coordination (the so-called Two-Pack), euro area Member States not under economic adjustment programmes are expected to submit their Draft Budgetary Plans by 15 October (Article 6 of Regulation (EU) No 473/2013). The Commission adopts its Opinions on the Member States' plans by end-November.

In the context of general elections on 4 October 2015, the Portuguese authorities did not submit a Draft Budgetary Plan for 2016 by the deadline of 15 October. The Commission urged the Portuguese authorities to submit the DBP as soon as possible, which the Portuguese government did on 22 January 2016.

Portugal is currently subject to the corrective arm of the Stability and Growth Pact (since December 2009) and was recommended to correct its excessive deficit by 2015. It was therefore to become subject to the preventive arm of the Pact and to the transitional debt rule as from 2016. Therefore the Council recommended that Portugal should achieve a structural effort of 0.6% of GDP in 2016. This constitutes the budgetary obligation against which the DBP has been assessed.

See also

Commission Opinion and Staff Working Document

Portuguese Draft Budgetary Plan (available in Portuguese and English)

Memo: Commission Opinion on the 2016 Draft Budgetary Plan for Portugal

IP:      Commission adopts Opinions on the 2016 Draft Budgetary Plans of euro area Member States

Memo: The EU's economic governance explained

Timeline: The Evolution of EU Economic Governance in Historical Context

EU economic governance

IP/16/253

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