Wednesday

1st Dec 2021

Merkel salutes Portugal's 'remarkable' cuts to health, welfare

  • Merkel (r) has given her blessing to the fresh austerity measures of the Portuguese prime minister (l) (Photo: consilum.europa.eu)

German Chancellor Angela Merkel has saluted Portugal's announcement of fresh cuts to public spending hitting health-care, state pensions and welfare benefits that aim to ensure that Lisbon reaches its public deficit targets.

"Portugal took a very important step already, as they have presented it today. It's a very good start for discussions," she told reporters in Brussels in a pause between an EU summit focussed on the situation in Libya and the wider north African region and a separate eurozone-only summit the same day focussed on the crisis in the area of the EU that employs the single currency.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Casting the country's efforts to satisfy Berlin against those of Ireland and Greece, whom she is pushing to accept respectively support for a common EU corporate tax base and tougher action on privatisation, she said: "Portugal today made remarkable steps, but others are still pending."

Ahead of the twin summits, Portuguese finance minister Fernando Teixeira dos Santos on Friday announced cuts amounting to 0.8 percent of GDP this year, giving the country a cushion, or "additional margin" in the words of the minister, should previously announced cuts not enable Lisbon to reach its 2011 deficit reduction target of 4.6 percent of GDP down from 7.3 percent.

The cuts hitting primarily pensioners, the unemployed and health-care, will see a reduction of 10 percent in state pensions above €1,500 a month, a cut in redundancy payments and a limiting of unemployment compensation to a maximum of 12 month's pay.

Health-care administrative and operation costs will also be pared back and publicly owned firms will also be affected.

The fresh measures come atop additional austerity imposed in January including a five-percent cut in civil servant wages and an increase in VAT to 23 percent.

The government says that the biggest savings will arrive in 2012 and 2013 however, cutting spending by a further 2.4 percent of GDP and increasing revenues by 1.3 percent of GDP over three years.

The ratcheting up of austerity comes despite warnings that the cuts themselves will push the country back into recession.

Echoing Merkel's statement, European economy and monetary affairs commissioner Olli Rehn also welcomed the news, calling the additional measures gave evidence of the government's "engagement to ensure fiscal sustainability."

A joint statement by European Commission chief Jose Manuel Barroso and European Central Bank chief Jean-Claude Trichet said that both Brussels and Frankfurt would be keeping a close watch to make sure Lisbon stuck to its promises via new national-budget oversight powers given to the EU: "The policy follow-up will be closely monitored by the European Commission, in liaison with the ECB, in the context of enhanced surveillance."

The announcement however failed to work its magic on markets, with the yield on the country's ten-year bond climbing to 7.6 percent.

No movement on Ireland

Asked about Irish expectations to lower the interest rate paid on its bail-out, Merkel said: "A lot of people expect a lot of things from you."

"We see it as our duty to make the euro as stable as possible. In order to reach one big package at the end of March, those countries who still have homework to do, will have to deliver."

She said she expected a ‘quid pro quo' from Ireland and Greece in return for movement on boosting the effective lending capacity of the permanent European rescue fund, to come into place from 2013.

"We want to make clear that a permanent mechanism would be only a last resort for countries to tap and that we need some quid pro quo, if we agree to more help and accommodating demands, we think this should be reciprocated with measures actually enhancing the stability and health of economies."

Austerity cuts not to blame for Greek drug shortage, EU says

The European Commission has said its austerity measures are not to blame for a decision by pharmaceutical giant Roche to halt delivery of cancer drugs to Greek public hospitals. The company warned Italy, Portugal and Spain might be next.

Luxembourg tax scandal may prompt EU action

An investigation into Luxembourg's tax regime has uncovered how the Italian mafia, the Russian underworld, and billionaires attempt to stash away their wealth. The European Commission has put itself on standby amid suggestions changes to EU law may be needed.

Investigation

Portugal vs Germany clash on EU corporate tax avoidance

Portugal's taking over the EU presidency puts the tax transparency law for corporations - which has been fought over for years - to a vote in the Council of Ministers. The resistance of the German government has failed.

News in Brief

  1. Ukraine eyes end of EU gas transit from 2024
  2. France says ready to talk about migrants if UK serious
  3. Latvia calls for permanent US troops to guard against Russia
  4. OPCW members urge Russia to come clean on Navalny
  5. Japan bars foreign arrivals as omicron spreads
  6. US to expel 54 more Russian diplomats, Moscow says
  7. Chinese president promises Africa one billion Covid vaccines
  8. Andersson elected as Swedish PM for second time in one week

Vietnam jails journalist critical of EU trade deal

A journalist who had demanded the EU postpone its trade deal with Vietnam until human rights improved has been sentenced to 15 years in jail. The EU Commission says it first needs to conduct a detailed analysis before responding.

Stakeholders' Highlights

  1. Nordic Council of MinistersNew report reveals bad environmental habits
  2. Nordic Council of MinistersImproving the integration of young refugees
  3. Nordic Council of MinistersNATO Secretary General guest at the Session of the Nordic Council
  4. Nordic Council of MinistersCan you love whoever you want in care homes?
  5. Nordic Council of MinistersNineteen demands by Nordic young people to save biodiversity
  6. Nordic Council of MinistersSustainable public procurement is an effective way to achieve global goals

Latest News

  1. Frontex implicated 'to some extent' in violations, says officer
  2. Omicron shows need for pandemic global pact, WHO says
  3. Pesticides 'cost double the amount they yield', study finds
  4. Scholz's first job? Work with Poland on Belarus crisis
  5. Why Is Italy struggling to convert its anti-vaxxers?
  6. Consultancies pocketing EU millions prompts MEP grilling
  7. Russian mercenaries using EU-trained soldiers in Africa
  8. EUobserver wins right to keep VIP-jet story online

Join EUobserver

Support quality EU news

Join us