Saturday

2nd Jul 2022

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.

Green crime-fighting boss urgently required, key MEP says

The European Parliament approved last week a non-binding resolution on illegal logging, calling to extend the EU public prosecutor's mandate to also cover environmental crime. The lead MEP on the file has called for urgent implementation.

News in Brief

  1. EU Parliament 'photographs protesting interpreters'
  2. Poland still failing to meet EU judicial criteria
  3. Report: Polish president fishing for UN job
  4. Auditors raise alarm on EU Commission use of consultants
  5. Kaliningrad talks needed with Russia, says Polish PM
  6. Report: EU to curb state-backed foreign takeovers
  7. EU announces trade deal with New Zealand
  8. Russia threatens Norway over goods transit

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online
  2. Nordic Council of MinistersNordic ministers write to EU about new food labelling
  3. Nordic Council of MinistersEmerging journalists from the Nordics and Canada report the facts of the climate crisis
  4. Council of the EUEU: new rules on corporate sustainability reporting
  5. Nordic Council of MinistersNordic ministers for culture: Protect Ukraine’s cultural heritage!
  6. Reuters InstituteDigital News Report 2022

Latest News

  1. Nato's Madrid summit — key takeaways
  2. Czech presidency to fortify EU embrace of Ukraine
  3. Covid-profiting super rich should fight hunger, says UN food chief
  4. EU pollution and cancer — it doesn't have to be this way
  5. Israel smeared Palestinian activists, EU admits
  6. MEPs boycott awards over controversial sponsorship
  7. If Russia collapses — which states will break away?
  8. EU Parliament interpreters stage strike

Join EUobserver

Support quality EU news

Join us