Portugal’s government expects a small budget deficit reduction this year to around 8.3 percent of GDP, but from a wider than previously expected gap in 2009, an opposition party leader has said.
Jose Pedro Aguiar Branco, the head of the centre-right Social Democratic Party’s (PSD) parliament faction, told reporters the government had told the PSD the previous day the deficit “could be more than 8.6-8.7 percent for 2009”.
“As for 2010, it can be around 8.3 percent or slightly lower than 8.3 percent,” Aguiar Branco said, confirming that his party wants to allow the budget’s passage, but has to see the full document first.
An abstention by the PSD, which has 81 seats in the 230-seat parliament, would be enough to pass the bill.
International ratings agencies say Portugal has to take credible measures to cut its ballooning deficit. They warn that otherwise they will downgrade the country’s credit ratings, which would hike borrowing costs, further exacerbating the problems of one of the euro zone’s weakest economies.
The latest estimate for 2009 exceeds a previous projection of eight percent deficit from an IMF report drawn up with the help of the Portuguese government at the end of last year. The IMF has warned this year’s budget deficit may rise to 8.6 percent.
Diario Economico daily said earlier the government used a 2010 budget deficit target of 8.2-8.3 percent of gross domestic product in its talks with the opposition.
It said the final deficit figures could still change.
After long talks with the minority Socialist government this month, the CDS-PP party, the third biggest party in parliament with 21 seats, announced “a constructive abstention” to pass the 2010 budget.
The two left-wing parties criticised the government’s plan, signalling they will likely vote against it.
Bernardino Soares, the head of the 13-strong Communist group in parliament, said after meeting Finance Minister Fernando Teixeira dos Santos on Monday the government was “obsessed with containing” the fiscal deficit “in detriment of economic growth and social justice”.
Soares also said the government wanted to resume the privatisation process, halted about two years ago, to which his party strongly objects.