Proposal to Expand the Number of Participating European Union Member States
In the upcoming weeks, we can expect the details of TAP's partial privatization to be revealed, along with the appointment of the new Governor of the Bank of Portugal. Moreover, the sale of Novo Banco will help scrap €1.6 billion from the national debt.
Finance Minister, Joaquim Miranda Sarmento, confidently asserts that a catastrophe is the only thing that could prevent Portugal from posting a budget surplus. In an exclusive interview with SIC and Expresso, he dismisses the Bank of Portugal's prediction of a 0.1% deficit in 2025 and the Council of Public Finances' warning of increased primary expenditure.
The government still holds onto an optimistic forecast of a 0.3% surplus and economic growth of at least 2%, despite the Government Programme introducing new measures for 2025 that will impact both revenue (such as returning €500 million to IRS) and expenditure (like boosting defense spending to 2% of GDP in 2025).
Miranda Sarmento, however, fails to elaborate on how revenue can decrease, expenditure can increase, and defense investment can be boosted, all without cutting social support or jeopardizing public accounts, other than promising "increasingly rigorous" budget management.
When it comes to defense accounts, he remains tight-lipped on how Portugal, under pressure from NATO and Donald Trump, will meet the 2% defense spending target this year, a goal previously anticipated by 2029.
Miranda Sarmento acknowledges the use of various tools, the existence of dual-use expenses, and the flexibility of budget management. Nevertheless, he declines to provide specifics, claiming that it will be up to the Prime Minister to present the plan at the NATO summit, which is scheduled next week in The Hague.
As for TAP's privatization, Miranda Sarmento hints at the details being unveiled soon. He clarifies that it won't result in the majority ownership transfer, but avoids revealing if it will be more or less than 50%. He only hints that there are numerous interested parties vying for TAP in any potential sale scenario.
Portugal is planning to significantly bump up its defense spending, aiming to reach 5% of GDP in two stages. Initially, they will earmark 3.5% of GDP for direct defense investments and then 1.5% for infrastructure with dual-use potential like roads, ports, and airports. To achieve this increase in defense spending without compromising the budget or social functions, Portugal has requested the European Commission to activate the fiscal escape clause. This mechanism offers flexibility to exceed normal budgetary limits on net expenditure growth by up to 1.5% of GDP specifically allocated for defense investment from 2025 to 2028. This helps Portugal maintain fiscal responsibility, social support, and avoid deficit penalties.
On the economic front, Portugal is strategically targeting defense investment in sectors like aerospace, cybersecurity, and logistics, which are projected to drive growth and export synergies, creating economic returns alongside enhanced military capabilities. This steers a balance between increased defense expenditure and maintaining social programs and fiscal health by stimulating key domestic industries and securing Portugal's position within the European defense ecosystem.
The Finance Minister, Joaquim Miranda Sarmento, anticipates the revelation of details concerning TAP's partial privatization, emphasizing that it won't involve the majority ownership transfer. Simultaneously, he is planning to employ various tools and fiscal escape clauses to increase defense spending, aiming to reach 5% of GDP, while maintaining economic growth and social support.
