New regulations separate nations into groups. Those with deficits and debt above the Pact’s limits, those below in both indicators, and those with debt above 60%, irrespective of budget balance.
In light of the new European Commission (EC) proposal for the management of public finances, Portugal will continue to be subjected to multi-year recommendations to reduce public spending so as to reduce the debt burden to 60% of Gross Domestic Product (GDP) for years, if not decades. This is despite the fact that Fernando Medina’s finances currently predict minimal deficits or public budget surpluses.
The debt ratio will remain above 94% of GDP in 2033, according to the most recent debt monitor published by the EC two weeks ago. Time may be required.
The government estimates that by 2027, the final year of the new Stability Program, the debt-to-GDP ratio will be around 92%.
According to the rules of the Pact that governs the accounts of Eurozone nations, there is still a considerable distance to travel. More than 30% of GDP until the target 60% is reached.
In the case of countries with public debt ratios above 60% of GDP (as is the case with Portugal today and for many years to come), despite the fact that they already have deficits below 3% of GDP, the reduction of public debt (as a percentage of GDP) should be accompanied by strict fiscal consolidation targets on the expenditure side.
Lidation on the expenditure side for countries with public debt ratios above 60% of GDP (as is the case with Portugal today and foreseen for many years), despite already having deficits below 3% of GDP, was proposed by the Commission yesterday (Wednesday, 26).
