Moscovici’s letter to Centeno advises against the risk of a “significant deviation” from European rulings in SB

  • ECO News
  • 27 October 2017

Pierre Moscovici and Valdis Dombrovskis sent a letter to the Portuguese Finance minister requesting further clarifications about the 2018 State Budget draft. Centeno has four days to reply.

The European Commissioner for Economic and Monetary Affairs, Pierre Moscovici, and the vice-president of the European Commission, Valdis Dombrovskis, sent a letter to the Portuguese Finance minister Mário Centeno, this Friday, warning him against the possibility of having “significant deviations” from European rulings, in this year’s budgetary execution and State Budget. According to the letter, which ECO was able to access, Mário Centeno has four days to reply.

After Portugal submitted its Draft Budgetary Plan (DBP) for 2018 to Brussels, on 16 October, as well as the updated DBP tables on 20 and 23 October, EC experts recalculated the structural effort planned for 2018 and the numbers do not match up with the Portuguese Executive’s, the letter states.

“We are writing to ask for clarifications on the compliance of Portugal’s planned fiscal effort in 2018”, is stated in the document, referring to the requirements Portugal needs to comply with within the Stability and Growth Pact.

Moscovici e Dombrovskis highlight the budgetary consolidation effort for 2018 of 0.5% of GDP, which once recalculated by the Commission services according to the commonly agreed methodology among member-States for the calculation of potential growth, amounted to 0.4%. “Although significant, this effort appears somewhat below the at least 0.6% of GDP required” within the Council recommendation of 11 July 2017, the commissioners’ highlights.

"According to the Commission’s preliminary analysis, this points to a risk of a significant deviation from the required effort in 2017 and 2018 together.”

Valdis Dombrovskis and Pierre Moscovici

Letter to Mário Centeno

In addition, the Portuguese Executive’s projections for the nominal growth rate of net primary expenditure “exceeds the recommended rate of 0.1%, pointing to a gap of 1.1% of GDP in 2018″. In addition, the letter states that “in 2017, the gaps amount to 0.5% and 1.0% of GDP based on the structural balance and the expenditure benchmark respectively”.

Brussels concludes that according to their preliminary analysis, “this points to a risk of a significant deviation from the required effort in 2017 and 2018 together”. The EC requested “further information” on the detailed composition of the budgetary consolidation structural efforts the Government is proposing.

The Commission ends the letter with a deadline for the Finance minister’s answer with the requested clarifications: 31st of October, next Tuesday, emphasizing that the EC “seeks to continue a constructive dialogue with Portugal in order to come to a final assessment”.