Portugal: Bailout ‘troika’ begin first review since Socialist government came in

Page created: Wednesday, 27 January 2016 14:56 GMT

Bailout  International Assessment  Troika

Lisbon, Jan. 27 (Lusa) – Representatives of the ‘troika’ of international institutions that oversaw the implementation of Portugal’s euro-zone bailout on Wednesday began their first review of progress since the country’s Socialist government took office and began rolling back austerity despite calls for caution from those institutions.

The visit by officials from the International Monetary Fund European Commission and European Central Bank is also the third since Portugal formally exited the bailout. On their last visit, in the summer, the IMF and commission both advised Portugal to exercise “caution” in reverting the exceptional revenue-raising measures introduced during the adjustment programme – in particular the income-tax surcharge.

International officials are concerned that any backsliding on budgetary discipline could mean missing deficit targets, so undermining investor confidence.

Under the new government’s plans, this year salary cuts imposed on public sector workers by the previous right-of-centre government are to be handed back on a quarterly basis to October, while the income-tax surcharge has been abolished for low-rate taxpayers and made progressive for medium-rate taxpayers. It is unchanged for higher earners.

The visiting officials are also likely to want to discuss the banking sector, after the winding up of the troubled bank Banif at significant cost to taxpayers and the failure so far to sell Novo Banco the successor to Banco Espírito Santo that is owned by the sector resolution fund.

On their last visit the troika took the view that the banking system was adequately capitalised, citing the reduction in its dependence on ECB financing, but called for “more decisive measures” to improve bank balance sheets.