It was in March 2020 that European Union finance ministers agreed to suspend budgetary rules. Less than two weeks had passed since the World Health Organization declared a Covid-19 pandemic. Two rules that, for years, had been a headache for many governments were thus frozen: the minimum improvement in the structural balance (cyclically adjusted balance without extraordinary measures) and the annual reduction of 1/20th in excess public debt as a percentage of the GDP.
The old rules did not return and have since been revised and may come into force soon. All that remains is approval in the European Parliament. They will now be used to evaluate the budgets that countries will present for 2025. Among them, Luis Montenegro’s first State Budget, where expenditure increases of some significance and tax cuts are expected.
We do not yet know the impositions that will be made on Portugal under the new expenditure rule but, at first glance, although there does not appear to be much scope for budgetary adventures, the AD scenario also does not collide head-on with what could be the demands of Brussels. Everything will depend on the assessment made by the Commission and, of course, on the Budget that will be presented.
