According to Portugal’s National Statistics Institute, last year’s budget deficit fell to 2.1% of GDP, the lowest value since 1974.
The European Commission opened the Excessive Deficit Procedures (EDP) on 7 October 2009 for failing to meet the 3% budget deficit limit under EU rules. After 7 years, 7 months and 15 days, on May 22, 2017, the European Commission recommended to the Council to abrogate the Excessive Deficit Procedures (EDP) for Portugal as the country has brought their deficits below the 3% of GDP.
The Commission stressed, however, that the country should remain “committed to an ambitious structural reform plan” which should include more efficient public spending, control over health and pensions spending and a response to high levels of bad credit in banking. Brussels also wants to improve labor market policies.
The Commission also recommended that the Council close the Croatian EDP. If the Council follows the Commission’s recommendation, this would leave only four Member States (United Kingdom, France, Spain and Greece) under the corrective arm of the Pact.
“It’s important for rating agencies to understand that Portugal today is different from the Portugal of 2012. The sustained reduction in household and company debt has been staggering.”
Mário Centeno, Portugal’s finance minister
When Portugal was hit hard by the eurozone financial crisis, the 3 major rating agencies, Fitch, Moody and Standard & Poor rated Portugal at junk status. This Monday’s European Commission recommendation could now trigger credit-rating upgrades and reduce government borrowing costs.
Portugal has urged the EU and rating agencies to acknowledge its economic turnaround as the country now has the lowest fiscal deficit in more than four decades.
In March 2017, the country’s finance minister, Mário Centeno, said in an interview that last year’s fiscal deficit would be “very close to 2 per cent” of gross domestic product. “Our economy has also been expanding for 13 consecutive quarters”. “If this is not enough for a country to leave the excessive deficit procedure, you have to wonder what is necessary.”
— European Commission (@EU_Commission) May 22, 2017