At the ECOFIN Council on Friday 16 September EU Economic and Monetary Affairs Commissioner Olli Rehn described the Bank of Portugal's announcement that the autonomous Portuguese region (island) of Madeira had failed to provide details of public spending of more than a billion euros in 2008-2010 as an unwelcome surprise, and said that the information would now be incorporated in the notification to be submitted to the European Commission by the Portuguese government on Friday 21 October under the excess deficit proceedings against Portugal. This hidden spending will increase Portugal's public debt by 0.3% of GDP. The Portuguese government says this is a one-off case and drastic measures will be taken to force Madeira to tighten its belt and ensure such matters never arise again. The Portuguese finance minister, Vítor Gaspar, attended the meeting in Wroclaw but refused to comment.
This is bad news for the new Portuguese government, which is currently implementing a three-year austerity programme as part of an international aid deal worth €78 billion. Under the terms of the loan, Lisbon must cut its public deficit from 9.1% to 5.9% of GDP and then reduce it further to return to below the 3% cut-off point in 2013. Its economy is in recession and is expected to shrink by 2.2% of GDP in 2011 and 1.2% in 2012, according to government forecasts. Rehn commented that implementation of the Portuguese austerity programme, which includes consolidation of public spending and the introduction of structural measures to stimulate growth, was “on track”, and therefore the first instalments of aid had been paid out. He explained that it was crucial that the momentum was kept up
(EuroMP Nuno Teixeira at an inauguration)
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