By CHRIS GRAEME Chris.graeme@theresidentgroup.com
The government has succeeded in pushing through parliament its package of stiff austerity measures aimed at bringing the inflated deficit back to three per cent by 2013.
It comes after ratings agency Fitch decided to slash Portugal’s creditworthiness on sovereign debt from AA to AA- with a negative outlook.
It was the first time Fitch cut Portugal’s rating since 1998 and rekindles fears that the international financial system is closely eyeing Portugal through a magnifying glass.
Minister for Finance Fernando Teixeira dos Santos said the decision not to vote against the government’s proposals was “the first positive sign after days of doubt in which I feared the worst”.
“We ran the risk of going through the same kind of social, economic and political upheaval that marked the 1980s if a strict budgetary policy had failed,” he added.
The PS government succeeded on persuading the opposition PSD party not to vote against the Stability & Growth Pact Programme (SGP) by promising to temporarily shelve the public works programmes meant to kick-start the Portuguese economy.
The PSD, in return for their compliance, had insisted that the government postpone the Lisbon-Porto and Porto-Vigo lines of the TGV high speed rail link for two years as well as delays on starting work on the new Lisbon International Airport, some road concessions and the third crossing over the River Tejo.
PSD members Pedro Passos Coelho and Paulo Rangel who said they would not help support a SGP programme based on increasing indirect taxes to reduce the budget deficit from 9.3 per cent.
However, the leader of the PS benches, Francisco Assis, said: “The SGP remains unaltered and we are not delaying any investments. The PSD simply called for there to be some balance between public investment and controlling the deficit.”
The rest of the opposition parties such as the left-wing Bloco de Esquerda and the right wing CDS-PP voted against the SGP.
Prime Minister José Sócrates, on being questioned about the PSD’s possible change in position over the government’s SGP programme, said: “I’m sure that everyone knows that they should accept responsibility for what happened in Parliament.”
The Government also decided not to award public sector managers with any pay increases or bonuses in 2010 or 2011.
