Portugal's financial deficit is now 132.4% of Gross Domestic Product (GDP) as at the end of April. In late 2013, the Portuguese public debt was in a sorry enough state at 129% of GDP, or €213,631 million.
There is a crumb of comfort that this state of affairs is an improvement of €287 million over the same period last year but this is like saying the Titanic’s engines were working well.
Social Security and Central Administration spending grew 0.8% and revenue increased 2.4% compared to 2013.
Payment of interest charges increased by 21.7% which is explained by "the additional debt burden on the State, up 41.3%, mainly from interest paid on Treasury bonds and the reduction of interest received under swaps contracts."
Government employee wage costs fell by 4% year on year due the inability of the administration to make the necessary cuts to its own headcount and payroll, despite promises to the Troika and a degree on tinkering that so far has served only to upset the unions which are adept at switching government resolve into submission.
Taxes sucked from an impotent public have of course grown substantially, a full 5% rise over 2013 with €11 billion being collected by the state in the first four months of this year.
The growth in overall tax revenue for the quarter was mainly due to an rise in direct tax income which jumped 8.4% due to people buying new cars again which saw vehicle tax (ISV) growing 40% and road tax increasing by 17%.
Curiously for a government with a penchant for applying easy to apply taxes, VAT only raised an additional €100 million in the quarter despite the rate now standing at 23% for a wider sweep of goods and services.
The 2014-2018 Budget Strategy Document the Government expects that the national debt will start to fall in 2015 to an estimated 128.7% of GDP, reaching a marginally more acceptable 116.7% in 2018.
The Maastricht Treaty and the latest EU Budgetary Treaty both establish that the public debt of EU States shall not exceed 60% of GDP.
This horrifying edict from the north caused the Bank of Portugal to work out the figures need for Portugal to reach this state of fiscal nirvana.
The country will have to pull of the feat of higher revenue than expenditure, excluding debt interest, equivalent to 2% of GDP per year for 20 years which will require a fiscal consolidation effort that would be "unprecedented in the recent history of the Portuguese economy," a polite way of saying “it can’t be done.”
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