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Portugal - Solid Foundations for a Sustainable Fiscal Consolidation

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  • David Haugh
  • Stéphane Sorbe

Abstract

Owing to slow growth and a relatively weak fiscal position, Portugal’s public debt had been rising for almost a decade when the global crisis struck, sharply increasing the deficit. The loss of confidence in Portuguese and other euro area sovereign bonds required international financial support. Weak fiscal performance reflects a wide range of fiscal structural problems resulting in poor control of expenditure. At both the central and local levels, this was compounded by the non-transparent accumulation of payment arrears, future spending obligations via Public-Private Partnerships (PPPs) and off-balance sheet debt in state-owned enterprises (SOEs). In line with the EU-IMF programme, the government is steadfastly implementing an ambitious front-loaded consolidation plan underpinned by a wide range of structural reforms. In a context of weak private sector demand, the government’s ability to regain control over public debt dynamics depends crucially on avoiding spending overruns. This will require reinforcing the fiscal framework to improve expenditure control, tackling payment arrears and avoiding further negative surprises from loss-making SOEs, PPPs and local governments. The success of the programme will also require maintaining social consensus around it, notably through continuous attention to its implications for the poorest. If growth is far lower than projected in the programme, the automatic stabilisers could be allowed to operate at least partially to reduce the risks of a deeper recession and higher unemployment. This Working Paper relates to the 2012 OECD Economic Survey of Portugal (www.oecd.org/eco/surveys/portugal). Portugal : Mettre en place des bases solides pour un assainissement budgétaire durable En raison de la lenteur de la croissance et d’une situation budgétaire relativement médiocre, la dette publique du Portugal était en augmentation depuis près d’une décennie lorsque la crise mondiale a frappé, creusant sensiblement le déficit. La perte de confiance dans les obligations souveraines du Portugal et des autres pays de la zone euro a exigé un soutien financier international. Les mauvais résultats budgétaires reflètent un large éventail de problèmes structurels se traduisant par un contrôle déficient des dépenses. Au niveau central comme au niveau local, ce dérapage des dépenses a été aggravé par l’accumulation non transparente d’arriérés de paiement, d’obligations de dépenses futures au titre des partenariats public-privé (PPP) et de dettes extrabudgétaires contractées par les entreprises publiques. En application du programme UE-FMI, les pouvoirs publics s’emploient à mettre en oeuvre un plan d’assainissement ambitieux, intensif dans sa phase initiale et étayé par un large éventail de réformes structurelles. Face à la faiblesse de la demande du secteur privé, la capacité des pouvoirs publics de regagner la maîtrise de l’évolution de la dette publique dépend de façon cruciale de la possibilité d’éviter des dépassements de dépenses. Il faudra pour cela renforcer le cadre budgétaire afin d’améliorer le contrôle des dépenses, de limiter les arriérés de paiement et d’éviter d’autres mauvaises surprises du côté des entreprises publiques déficitaires, des PPP et des collectivités locales. Pour aboutir, le programme devra aussi préserver le consensus social dont il fait l’objet, notamment en tenant compte continument de ses incidences pour les pauvres. Si la croissance est bien inférieure aux prévisions du programme, on pourrait laisser jouer les stabilisateurs automatiques au moins en partie pour réduire les risques d’un approfondissement de la récession et d’une aggravation du chômage. Ce Document de travail se rapporte à l’Étude économique de l’OCDE du Portugal, 2012 (www.oecd.org/eco/etudes/portugal).

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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 985.

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Date of creation: 13 Sep 2012
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Handle: RePEc:oec:ecoaaa:985-en

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Keywords: Portugal; automatic stabilisers; local government; fiscal rules; public-private partnerships; state-owned enterprises; fiscal council; public debt sustainability; Madeira; budgeting; EU funds; fiscal frameworks; conseil budgétaire; entreprise publique; procédure budgétaire; Madère; fonds structurels européens; viabilité de la dette publique; partenariats public-privé; stabilisateurs automatiques; règles budgétaires; Portugal; collectivités locales; cadre budgétaire;

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