Portugal cabinet adopts budget without waiting for EU blessing

The Portuguese government on Thursday adopted its 2016 draft budget, a day before the European Commission was due to deliver its verdict on the country's progress towards more austerity.
The EU Commission had asked Portugal to revise its budget to adopt a tighter fiscal stance and was to present its assessment on the changes by Friday, the same day the budget is scheduled to be submitted to the Portuguese parliament.

The draft budget "has been approved", a government spokesman told AFP, without giving details of the plan, which are to be made public only after deputies have seen the draft.

On Wednesday, a government official said that Portugal had agreed to lower both its budget deficit and growth forecasts following pressure from the EU Commission.

The new Socialist-led minority government, allied with the radical left, cut its projected budget deficit to 2.4 percent of Gross Domestic Product (GDP), from 2.6 percent announced two weeks before, the official said on condition of anonymity.

Last year, Portugal's budget deficit came in at 4.2 percent, well above the EU's 3.0-percent limit.

It also lowered its growth forecast to 1.9 percent, from 2.1 percent, after Brussels said the draft budget was too optimistic.

The European Commission on Tuesday demanded Lisbon rework its draft budget -- which was delayed by Portugal's inconclusive October elections -- because it fell short of commitments to reduce public spending.

And earlier on Thursday, the International Monetary Fund said Portugal's draft budgetary plan "implies a loosening of the fiscal stance" after its experts finished a week-long review in Lisbon.

Meanwhile the European Commission and European Central Bank, whose officials also participated in the review of Portugal's finances, said "progress in structural reforms lost momentum during 2015" and that "an effort to reduce the underlying structural budget deficit needs to be significantly increased".

"The Portuguese authorities have submitted proposals which are going in the right direction," EU Economic Affairs Commissioner Pierre Moscovici said in Brussels earlier Thursday.

"There is still work to do however and I hope we will reach an agreement within the next few hours," he told a briefing on the European Commission's winter growth forecasts.

Portugal received a massive international bailout in 2011 that saved it from defaulting on its debt, but in return the country had to introduce a string of austerity measures.