Portugal: a possible Greek scenario?

The current political upheaval has its roots in years of low growth and borrow-and-spend policies which weakened Portugal and compelled it to ask for the 2011 bail-out amid the eurozone's debt crisis.

The centre-right government introduced debt-reducing austerity measures demanded by creditors.

In November, the left alliance, formed out of several left parties such as the Socialist party, the Portuguese Communist party and the Left Block (BE), signed an agreement for the approval of a Socialist Party Government program with a left-wing majority support in parliament, to begin overturning the austerity measures implemented by the last right-wing government. 

The main points of the agreement:

- the welfare state will not be unprotected

- No decrease in salaries or pensions

- No increase in taxes on income or essential services and goods

- No reduction of central economic planning

In terms of the political proposal of the agreement, is the following:

1. There will be no conciliatory regime (easy layoffs) inscribed in the

government's program

2. There will be no reduction on the social contribution by employers

3. Pensions will be updated on January 1st of 2016 with the guarantee of

no nominal cut

4. The diversification of sources of financing for social security will be

negotiated with the social partners, based on a common proposals by the

signing parties

5. The social contribution paid by workers will be reduced until a

4% limit is reached, with no consequences on the pension formula on those with a salary equal to or below 600 Euros per month. The loss of public revenue from this measure will be

compensated each year with transfers from the state to social security

6. The national minimum wage will be increased up to 600 Euros during this

legislature, with 5% increases in the first two years (505 to 530; 530 to

556)

7. Reenforcement of the powers of the authority for labour conditions in

the regularization of precarious and illegal work agreements, with the

immediate conversion to labor agreements and access to respective rights

8. Gradual restitution of salary cuts made to the public administration during

the right-wing governemnt will begin January 2016 (25% the first

trimester, 50% in the second, 75% in the third and 100% in the fourth)

9. All holidays eliminated by the previous legislature are restored and restituted

10. Fiscal Policy:

a) Increase in the progressivness of the IRS through an increase in the

number of tiers

b) Elimination of the family quotient introduced by the 2015 State Budget,

and its replacement with a deduction for each children, with no regressive

disposition, and neutral from a fiscal point of view

c) Introduction of a safeguard clause in the increase of real estate tax in real estate re-evaluation cases with limits of 75 Euros per year, in cases of permanently owned housing of low value;

d) Prohibition of repossession of family housing where the debt is less than the value of the

equity, and suspension of home repossessions in the remaining cases;

e) Revision of the fines and interest applied in the cases of

unfulfilled tributary obligations and an introduction of mechanisms that

set a maximum on the fines applied for infractions on singular

representatives (for example, in the case of unfulfilled declaritive

obligations)

f) Establish the situations and conditions in which a payment plan on fiscal,

tributary and social security debts may be negotiated and accepted

g) Reduction of the restaurant VAT to 13%

h) Reversal of the participation exemption established in the recent

Collective Revenue Taxes (IRC) reform (back to a minimum of 10% of social

participation) and the deadline for fiscal losses (from 12 to 5

years)

i) Creation of an incentives plan to attract businesses and the

increase in production on the border territories, namely through fiscal

benefits in the IRC regulated by regional distribution of employment.

11. On the costs of electricity and gas for families:

a) The social tax credit is redesigned so that families

with low resources and social aid benefits, are automatically approved the credit in cases where the incomes were not low enough to qualify for further aid, but

people still found themselves in a vulnerable situation (through the issuing of

an income note by the Tax Authority).

b) Withdrawal of the television tax from the electricity bill and

incorporate it in the comunications chapter with no loss of revenue for

the Public Television (RTP)

12. Privatizations and Concessions

a) Annulment of concessions and privatizations regarding the public transportation in Lisbon and Oporto

b) Reversal of the water companies conglomeration that has been imposed on the

municipalities

c) Reversal of the privatization process of EGF (Waste Management), based

on its respective illegality.

d) No other concession or privatization will be approved in the future