Portugal's budget deficit fell below 2% last year so European Commission has announced the country is a poster boy for its austerity policies and has recommended that it is allowed to exit the EC excessive debt procedure.
After its 2011 bailout, Portugal suffered harsh austerity policies under the Passos Coelho government which was kicked out in 2015, to be replaced by a milder form of austerity under the Socialist Party leader, António Costa.
“Today is a good day for Portugal," said Portugal’s finance minister, Mário Centeno, marking the end of having to deal with the EU economy commissioner, Pierre Moscovici.
Portugal’s finance ministry called the move a "turning point" and that “It expresses the evaluation of the Commission that Portugal's excessive budget deficit has been corrected in a sustainable and lasting way."
Portugal now is stifling giggles as both France and Spain are still subject to the Commission’s disciplinary procedures with France's deficit at 3.4% last year and Spain's at 4.5%.
The closure of the Excessive Deficit Procedure imposed on Portugal in 2009 was recommended by Brussels to the Council of Ministers of Finance of the European Union (ECOFIN).
The argument put forward was that Portugal lowered its deficit to 2% of GDP in 2016, and that Brussels estimated a deficit of 1.8% for this year and of 1.9% in 2018, thus meeting the conditions for an exit.
In its recommendation to the Council, the Commission noted that its projections "do not include the potential impact of measures to support banks" which would in increase the deficit. The EC is well aware of the looming problems at Caixa Geral de Depósitos which is in need of a huge recapitalisation and at Novo Banco where the agreed deal with Lone Star leaves taxpayers open to further cash calls.
The Commission said there is still much to be done in order to mould Portugal into a good European partner, including a comprehensive strategy to remove the threat of bankruptcy from banks and an improvement in efficiency and transparency in public administration.
Also, there was a recommendation to State owned companies, to "Define specific sector efficiency targets in time for the 2018 budget" to "improve the overall net profit of state enterprises and reduce the burden on the State Budget."
There also was a warning that public administration Portugal continues to have "low levels of efficiency and transparency" and that only lip-service has been paid by public institutions.
None-the-less, Portugal is free and it remains to be seen how the various political parties making up António Costa's left wing support system will react after a long period of having their demands put on hold, "because of Europe.'