Portugal granted an extension to assistance programme

The ‘technical reasons’ earlier cited for the extension of Portugal’s bail out period have been laid clear by the IMF which stated today that a letter from the Portuguese government sought this extension, which was granted.

Deputy Prime Minster Paulo Portas is sticking to May for an exit from the bail-out programme, the IMF says that this now is scheduled at the end of June by the government’s own request.

The International Monetary Fund accepted the request from the Portuguese authorities to extend the assistance programme to June 30th, the government’s commentary read, "Having regard to the purpose of the agreement to May 19th, 2014 the extension for technical reasons until June 30, 2014 was ordered.'

According to the letter the extension allows the government to analyse the latest economic indicators, complete the final review and download the final dollop of money under the aid programme, except it  used the posh word 'tranche,' either way, it will still have to be paid back.

Paulo Portas, releasing the 11th Troika evaluation to journalists, assured them today that the end of the programme is a date in May - the 17th or the 19th despite being part of the government that asked successfuly for the extension. Portas then declined to comment on the issue of wages, a theme discussed in the IMF report but luckily for the Deputy PM the matter is safely buried at the Constitutional Court and “it would be inconvenient to make any comments in relation to this matter."

More important than mixed messages from government minister was the news today that the IMF wants to control Portugal’s fiscal actions from beyond the grave, stating that it is looking for a consensus from Portugal’s politicians to 'avoid excessive tax cuts.'

The Troika is worried about what might happen in Portugal at the end of the bailout programme and wants to see Portugal develop a sufficient political consensus to avoid any budgetary measures that might jeopardise the future of the objectives set by the Troika.

The Troika report of the 11th review shows a growing concern with what the country will do in future budgets. The IMF warns that despite the recent positive results, "close monitoring of budget implementation remains critical given the still significant fiscal risks."

Although its  lenders are confident, historically the Portuguese government always seems to have found a way to correct the deficit, the IMF asks for a broader agreement between parties, "a political consensus is essential to anchor the medium-term budgetary plans of Portugal and to resist any future pressures to increase spending or reduce taxes beyond established budgetary levels," the report states.

The Government has said that in 2015 there could be a reduction in income tax, and next year a reduction in corporation tax. Passos Coelho will no doubt hold back any tax reductions until election year. In the meantime the goverment has time to ponder it approach when released from under the Troika's fiscal microscope.

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