The 2024 State Budget (OE 2024) should be approved on November 29, enter into force on January 1 and remain in force until the summer, as the President of the Republic (PR), Marcelo Rebelo de Sousa, decided to call parliamentary elections plans for March Next year 10th.
For now, the António Costa-led government will have full powers until early December, with OE 2024 coming into effect on January 1 (assuming the absolute majority works and approves the proposal, which is almost inevitable). Then it will become a management government, according to the PR.
But constantly the country avoids a situation that is very restrictive from a financial point of view and undesirable for many, from the PR to the representatives of the bosses and many analysts and evaluators in the country, who would be related to budget management. in twelfths, in which you divide the annual pie you spent in 2023 at most per month by 12.
Public investment: a case study
Just look at what could happen in the case of the crucial and desired public investments.
The PS government estimates that 7.4 billion euros will be invested this year, divided between 2.2 billion euros in European funds and 5.2 billion in national efforts.
With twelfths, the government in administration would be largely subject to these areas of expenditure.
Quite a limitation, considering that the OE 2024 proposal provided for an increase in public investment to €9.2 billion, the highest ever, with €3.4 billion absorbed in European funds and €5.8 billion in national financing (from the OE).
If we look only at the part of the financing that comes from the OE, we are talking about a possible reduction imposed through the twelvedecimal rule of the order of 10% or more. This, in addition to the typical constraints that have (for decades) affected the implementation of public investments, could even lead to the paralysis of projects, with consequences for the absorption of European funds and related private investments.
Guarantee of the country’s expectations and stability
Without the shackles of twelfths, Marcelo Rebelo de Sousa hopes to offer the country “the guarantee of the indispensable economic and social stability provided by the prior vote on the 2024 state budget, even before the resignation of the current Prime Minister is formalized.” early December”.
According to the President, “the approval of the budget will allow us to meet the expectations of many Portuguese” and, he stressed, “to monitor the implementation of the Recovery and Resilience Plan (PRR), which is not stops, and cannot stop, with the transition from government to management government, or later with the dissolution of the Assembly of the Republic.”
On Wednesday, the powerful rating agency Standard & Poor’s, anticipating the evolution in continuity announced by Marcelo, announced that the 2024 budget year is relatively quiet.
“The risks appear modest”, “for now we do not expect there to be significant delays in disbursements from the Recovery and Resilience Mechanism (MRR), given the country’s strong commitment and the fact that Portugal has already requested the third and fourth tranches of the requested funds from Next Generation EU in October and the European Commission approved Portugal’s request to increase the total amount disbursed from EUR 16.6 billion (6.3% of GDP) to EUR 22.2 billion (8, 6% of GDP),” said S&P.
But after 2024, S&P warned that it is already somewhat skeptical about the direction of public finances, about whether the next government will be able to maintain the “long history of fiscal prudence” of (recent) socialist finance.
The process
As PR explained, the Assembly of the Republic must be dissolved on January 15 (to meet the constitutional deadline of at least 55 to 60 days until the new election date) and after the parliamentary elections, the winners must organize themselves and elect the heads of government. The new government must draw up its program and, once installed, be able to submit a correction if necessary.
This will be the case if the economic and social situation deteriorates, causing expenditure to rise even in the case of a new PS government.
If the PS does not win, a government of a different color will try to give it its own twist through different policies. Therefore, there will also be room here for such a document that corrects or reallocates the financial situation. priorities that the new government wants to give to public expenditure.
Both scenarios mean that, with the elections on March 10, it will be necessary to wait about five months until a new OE is ready and approved to enter into force.
What was it like in 2022
It was something similar to what happened in 2022, but at that point the absolute majority of the PS had already more or less prepared everything. The Minister of Finance, João Leão, had the OE for 2022 ready at the end of 2021 and even the stability program.
After the elections, his successor, Fernando Medina, would initially discard this proposal, which had initially been rejected by the end of the apparatus (the support of the BE and the PCP for the OE of the PS, which had a relative majority in 2021). shifted, almost completely regained.
Recall that OE 2022 failed in the AR at the end of 2021 and the country held early elections on January 30. Even with everything sorted out, the new PS government did not see the reissue of its OE 2022 come into effect until June 27 of that year. Five months later.
Now, with the elections on March 10 and if we extrapolate this timeframe from 2022, the country risks a rectification (if necessary of course), perhaps not until the end of July.
André Ventura, the leader of Chega, one of the parties that wants to form a government with the PSD, regretted this last night. “The next government will be bound by what the Socialist government and the past that António Costa leaves behind” and “in the first months this administration will have to be carried out with the budgetary and economic instruments of the PS”, probably “until the end this summer”.
Not everything is won or lost
Therefore, 2024 will be at least the year of half of the State Budget (OE) or at most the year of two-thirds of the OE proposal that we know today.
In other words, not all is lost in the IRS relief; the controversial increase in the IUC could take place, and the promised strengthening of various social support measures against the consequences of the crisis, the increase in the cost of living and interest rates is partially guaranteed. .
With an OE running without major restrictions (even with a management government, which simply cannot legislate new initiatives), some of the major public investments planned for 2024 and already launched (such as some railway projects, the new hospital in Lisbon) can continue, although the government’s more limited action may jeopardize the pace of some projects.
This does not jeopardize the anchoring of precious European funds, namely those of the Recovery and Resilience Plan (PRR), but, as we see, it could slow down the pace of implementation.
A government with the current administration does not have the power to deeply engage and decide. And all legislative acts that have yet to be approved in the AR automatically expire with the dissolution of the Assembly, which, as mentioned, should take place on January 15.
In any case, following the president’s decision, all measures announced in mid-October by Finance Minister Fernando Medina will come into effect on January 1 next year.
And others are even going outside the OE and are already on their way. Yesterday the government approved the increase in the minimum wage and the revision of civil servants’ salaries. The increase in pensions is a consequence of its own law and will also follow the promised path.
Luís Reis Ribeiro is a journalist for Dinheiro Vivo
Source: DN
