It was not the right time for a crisis in Portugal

In Portugal, the investigation into alleged bribes linked to lithium mining, which led to the arrest of five people linked to the Portuguese government, the unexpected resignation of Prime Minister António Costa at the fall of the government and the calling of early elections. will have effects that go beyond politics. The outgoing government has been involved in rather strategic and important economic operations, which it will not however be able to carry out in this moment of transition where it remains in power solely for current affairs.

This means that the government’s various plans for the economy they will be stuck for a while , at least until the formation of the next government after the elections. There are at least three notable ones: the difficult privatization of the national airline TAP Air Portugal, the ambitious plan to reform tax breaks for foreign residents and the management of the European Recovery Fund. Then there is a more ordinary, but still relevant, question for the Portuguese economy: the government must also approve next year’s budget by the end of December.

These projects may not seem so urgent, especially in an economy that is generally doing well: gross domestic product is growing and public debt as a percentage of GDP has even fallen below 2019 levels. According to the OECD , the Organization for Economic Cooperation and Development, the country however needs investments, reforms and long-term plans, also to address some historical weaknesses such as the rapid aging of the population and the lack of qualified personnel for the growth of the economy. And the three government plans that could be delayed are among the most relevant interventions to guarantee all of this.

The first, namely the sale of TAP Air Portugal, the national airline currently under state control, had been planned for some time. Throughout its history, the company has continually alternated between public and private ownership: it was last privatized in 2015, only to be renationalized in 2020, when the company was in crisis and the state had bought it back as part of a rescue plan agreed with the State. European Commission.

After four years of losses, the company made a profit of 65.6 million euros last year and even more positive results are expected this year. In September, the government he announced that they want to sell it and they want to complete the transaction by the middle of next year. Some of Europe’s largest carriers were interested, including Lufthansa, Air France-KLM and IAG Cargo, but the operation is likely to remain on hold until a new full government takes office.

This means that the State will have to wait several more months before receiving the proceeds from the sale. But the consequences are not only financial: in fact, the strategic overhaul of the company is underway, which, under public control, has only been put back into working order and to stop losing money. The sale of TAP was also supposed to be an opportunity for the government to rethink the national air sector in general and in the long term.

The second major economic intervention that will probably be postponed is the reform of tax benefits for foreign residents in Portugal: they are currently very generous and have therefore attracted for years many retirees and digital nomads, who move their residence to the country to take advantage of tax. benefits.

The program was introduced in 2009 as a measure to at least partially stem the consequences of the 2008 economic crisis, which were particularly harsh in Portugal. The country has also issued “golden visas” to foreigners who purchase houses and apartments of a certain value in the country. The visas guaranteed the possibility of living and moving freely in the European Union for five years and were very successful, especially among people of Russian and Chinese nationality.

The government recently decided to put an end to this system of incentives in an attempt to put an end to the increase in real estate prices, which, especially in large cities like Porto and Lisbon, have become very high and do not correspond not to the standard of living of the inhabitants.

To try to stem the historic shortage of professionals and the structural emigration of young people, he then announced measures aimed at encouraging the most qualified young people to stay in the country, such as tax reductions over the first five years of work for graduates and reimbursement of university fees for those starting their professional career in Portugal.

These measures were to be included in next year’s budget, and it is not certain that they will be included there anyway: this is not a given because the removal of services now consolidated in the local economic system and which for years The guarantee of good tax revenues requires a certain political strength, which a resigning government is not necessarily guaranteed to have.

Finally, there is the issue related to funds from the Recovery Fund. Portugal has already received a sum of 2.7 billion euros, but must speed up approval of the remaining projects if it wants to receive the remaining 22 billion by 2026. So far, only 12 percent of the funds have been used.

Source: ilpost


Leave a Reply

Your email address will not be published. Required fields are marked *