Portugal government targets budget surplus in 2020, irks allies

The Portuguese government on Friday narrowed this year's budget deficit target despite criticism by its hard left allies and said the once bailed-out country should post its first budget surplus in 2020, significantly alleviating its huge debt burden. In a stability programme for 2018-2022 presented by Finance Minister Mario Centeno, the government expects a surplus of 0.7 percent of GDP in 2020 and 1.3 percent at the end of the programme. Next year the deficit should narrow to just 0.2 percent from this year's projected 0.7 percent.
"We don't have a short memory. We know what it cost the Portuguese to leave the nightmare behind and we will not follow this path," Centeno said referring to the 2010-13 debt crisis after years of spending beyond Portugal's means. "The path of budget sustainability is the safe road of our future," he said. The previous target for 2018 was 1.1 percent and the revision has already caused objections from the minority
Socialist government's hard left allies in parliament, prompting Prime Minister Antonio Costa to defend his strategy. The Eurosceptic Left Bloc and the Communists have argued that the administration should spend more on healthcare and public servant wages rather than cutting the deficit overzealously below the target they agreed to a year ago. However, Costa told reporters that the new plan does not compromise their deal, which was to keep reducing the deficit in line with EU guidelines, whereas sticking to the original target for 2018 would have lifted it from 2017 levels.
He said the new reduction was possible after Portugal hit a more than four decade low in its 2017 budget gap of 0.9 percent, excluding a one-off bank recapitalisation, as the economy grew at its strongest pace since 2000.