Socialists insist warnings (by former Socialist minister) ‘should be taken very seriously’
President of Portugal Marcelo Rebelo de Sousa has dismissed concerns about the possibility of a deficit in 2025 saying that the governor of the Bank of Portugal has always been “very demanding”.
Marcelo was speaking to journalists about the Bank of Portugal’s December economic bulletin, which among other predictions, suggests a return to a deficit situation in 2025.
According to Marcelo, “forecasts all go in the opposite direction”.
“But that has always been the case. When he was a minister, the current governor, Mário Centeno, was always very demanding and orthodox regarding finances. And so it doesn’t change, at that age, it doesn’t change…”
Centeno “prefers to prevent, always to tighten – that was the big issue with his government colleagues: they wanted to spend, and he wanted to tighten”.
Now, because of the external situation, “the governor wanted to say to the government: don’t spend too much, because there was slack, and there is still slack, but there are limits to slack,” he summarised, taking into account the “increases in various sectors of the Public Administration, of benefits that had been due and promised for a long time.
“It is very much the position he had as finance minister. As finance minister, he was very tight and very tight-fisted, in the sense that prevention is better than cure, and he was always very concerned about public spending,” recalled Marcelo.
“The year hasn’t started yet”. Centeno’s words should be seen not so much as a prediction, but a warning to the government, led by his own party’s rivals, that next year, he won’t let them off the hook.
This led to questions as to whether Marcelo is ‘worried’ about what could be coming down the line. “No, I’m not worried. In that sense, the year hasn’t started yet. I am worried about the international situation. But I think an even remotely attentive government realises that if things are going badly out there, it doesn’t have as much money to spend”, he said.
In the president’s opinion, “the government naturally has room to manoeuvre. It has twelve months to see what happens and not to spend what could lead to a deficit,” depending on the European and international economic situation.
Marcelo Rebelo de Sousa divided the Bank of Portugal’s forecasts into “good news” for this year and “less good news” for 2025.
Regarding this current year, he emphasised: “The growth rate has risen; we’re going to grow a little more than we thought. (Centeno) puts it at 1.7%, which in European terms is good. Unemployment hasn’t risen, we’re holding on to the budget with a surplus, tourism is holding up very well, foreign investment is reasonable, and domestic consumption is holding up”.
In other words, the mumblings by opposition members that that government ‘should listen to what Centeno says’ and take it all ‘very seriously’, may be more ‘sour grapes’ generally than any form of true financial insight.
As for 2025, Marcelo recalls that the central bank “acknowledges reasonable growth for next year, so it is not pessimistic” but it “is very pessimistic about developments in the world and Europe“, fearing “that Germany won’t take off, that France will have bad results” and that all this will have an effect on Portugal.
According to Marcelo, in this context, “there is a concern that spending will rise so much that it ends up giving a minimum deficit” of 0.1% of GDP, but: “When you measure it, it could be 0.1% more or 0.1% less”.
In other words, Centeno’s ‘clout’ as the current governor – so fresh from running the country’s finances for the Socialists – is not perhaps as taken quite so to heart as that of his predecessor.
When Mário Centeno was nominated as governor of the Central Bank, an article in Euroactiv website quipped: “Never have the revolving doors of finance spun so fast”.
Source: LUSA
