Friday

26th May 2017

Portugal unveils tax hikes to meet EU bail-out demands

  • A fresh general strike has been called for mid-November after the Portuguese government imposed a further round of tax hikes. (Photo: Pedro Ribeiro Simoes)

Portugal's centre-right government unveiled across-the-board tax hikes on Wednesday (3 October) to ensure the country meets debt and deficit targets required under the terms of its bailout.

Finance minister Vitor Gaspar said that plans for an "enormous increase in taxes" in 2013 are necessary for the embattled country to meet its 2013 deficit target of 4.5 per cent.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

The Portuguese economy is expected to report a 3 percent contraction in 2012 followed by a further 1 percent dip in 2013 - a third consecutive year of recession. Unemployment is also projected to peak at 16.4 percent rather than the 15 percent figure previously projected.

Among the headline tax rises were a one-off 4 percent tax on all incomes, with earners in the top band of €153,300 expected to pay an additional 2.5 per cent solidarity levy.

Gaspar added that the government would reduce the number of income tax brackets in 2013 to five from eight, pushing millions of workers into higher tax bands.

The government also intends to raise taxes aimed at the rich by increasing taxation of capital gains, assets, financial transactions, tobacco and luxury goods. However, it backed down on plans to increase employee payroll taxes from 11 per cent to 18 per cent.

The country's largest trade union, the the General Confederation of Portuguese Workers, announced on Tuesday (2 October) that it will call its 600,000 members out on general strike against austerity on 14 November. But the country's other, slightly smaller and more moderate confederation, the General Workers' Union, said it would not join the walkout.

The country is still expected to receive the remainder of its €78 billion bailout package agreed with the troika of the European Commission, IMF and European Central Bank which runs until mid-2014.

Meanwhile, the country is also laying the ground for an expected return to the bond market in September 2013 by selling €10 billion of 18 month and 3 year bills at rates between 3.5 and 5.5 percent.

Yields on 10 year government bonds have also fallen sharply in 2012 from 16 percent to 7.5 percent, although this figure remains higher than the 7 per cent figure regarded as the tipping point beyond which debt servicing cannot be maintained.

Portugal has been shut out of the bond market since requesting emergency funding in April 2011 and had its credit rating downgraded to junk status in January.

Despite the country's economic woes, the troika expects Portugal's debt mountain to peak at just over 120 percent in 2013 before falling.

A troika statement released in September insisted that the Portuguese debt burden "remains sustainable and will be on a firm downward trajectory after 2014."

Agenda

Growth and budgets in the spotlight this WEEK

A European Parliament vote on the EU budget for 2013 and a multi-billion euro European Commission proposal to create more jobs dominate this week’s agenda.

Portugal in crisis after 1mn say No to austerity

Portugal is in political crisis as it struggles with a major popular backlash in the face of troika-approved austerity measures that would raise social contributions for employees.

Economic gloom poses problems for bailed-out countries

Recession-hit Portugal is likely to miss its deficit target this year, the troika of international lenders is expected to conclude in September. Meanwhile, lower growth in Ireland may also bring troubles further down the road.

Column / Brexit Briefing

Ukip's last electoral stand

Nigel Farage's anti-EU party is unlikely to win any seats at the 8 June elections. After the loss of his charismatic leadership, the party is just a rag-tag of third raters.

Investigation

Fight Club: Russische Spione suchen EU-Rekruten

Sicherheitsexperten warnen, dass russische Geheimdienste Kampfsportvereine nutzen, um potenzielle Unruhestifter in Deutschland und anderen EU-Ländern zu rekrutieren.

Column / Brexit Briefing

Ukip's last electoral stand

Nigel Farage's anti-EU party is unlikely to win any seats at the 8 June elections. After the loss of his charismatic leadership, the party is just a rag-tag of third raters.

EUobserved

Scramble for UK agencies paves way for Trumpian claims

The Spanish health minister this week bragged that Barcelona was “the best city”, had “the best building”, and “the best infrastructure” to host the EU's medicines agency post-Brexit.

News in Brief

  1. Malloch will not be US ambassador to the EU
  2. 'Significant' drop in EU migration to UK
  3. Bomb injures former Greek PM
  4. British PM to speak out on US terrorism leaks
  5. Tusk calls for 'values, not just interests' after Trump meeting
  6. Pressure grows on climate impact of EU timber harvesting
  7. US goes after Fiat Chrysler over emissions cheat
  8. Munich police break up Europe-wide burglar clan

Stakeholders' Highlights

  1. UNICEFChild Alert on Myanmar: Fruits of Rapid Development yet to Reach Remote Regions
  2. Nordic Council of MinistersBecome an Explorer - 'Traces of Nordic' Seeking Storytellers Around the World
  3. Malta EU 2017Closer Cooperation and Reinforced Solidarity to Ensure Security of Gas Supply
  4. European Healthy Lifestyle AllianceHigh-Intensity Interval Training Is Therapeutic Option for Type 2 Diabetes
  5. Dialogue Platform"The West Must Help Turkey Return to a Democratic Path" a Call by Fethullah Gulen
  6. ILGA-EuropeRainbow Europe 2017 Is Live - Which Countries Are Leading on LGBTI Equality?
  7. Centre Maurits CoppietersWhen You Invest in a Refugee Woman You Help the Whole Community
  8. Eurogroup for AnimalsECJ Ruling: Member States Given No Say on Wildlife Protection In Trade
  9. European Heart NetworkCall for Urgent Adoption of EU-Wide Nutrient Profiles for Nutrition & Health Claims
  10. Counter BalanceInvestment Plan for Europe More Climate Friendly but European Parliament Shows Little Ambition
  11. Mission of China to the EUPresident Xi: China's Belt and Road Initiative Benefits People Around the World
  12. Malta EU 2017EU Strengthens Control of the Acquisition and Possession of Firearms