November 29, 2018 / 2:10 PM / 4 months ago

Portugal's parliament passes deficit-shrinking 2019 budget

(Reuters) - Portugal’s parliament on Thursday approved in the final reading the minority Socialist government’s 2019 budget bill that aims to nearly eliminate the deficit in an election year, further reducing Portugal’s debt burden, still one of Europe’s heaviest.

Speaking before the vote, Prime Minister Antonio Costa announced that his fiscal consolidation policies will allow the early repayment of the remaining part of bailout loans provided by the International Monetary Fund by the end of this year.

“By the end of the year we will have paid the full amount owed to the IMF, the remaining 4.6 billion euros, with all the significance of turning the page that it entails,” Costa said.

Costa’s centre-left administration has managed to combine fiscal improvements with policies to support growth, while reversing many unpopular austerity measures imposed during the EU/IMF bailout program.

“The 2019 budget continues these good policies, prepares us for the future, guaranteeing financial sustainability,” he said.

Portugal’s example, lauded by Brussels, is in sharp contrast to Italy’s plan to widen the budget deficit, condemned by the European Commission and a cause of investor unease.

The budget, that set the deficit at just 0.2 percent of gross domestic product after this year’s projected 0.7 percent, was approved by the Socialists and their far-left allies in parliament - the Communists and Left Bloc - with few tangible changes from the first vote a month ago.

The remaining lawmakers - the centre-right opposition Social Democrats and conservative CDS-PP - voted against, criticizing the bill as an election year gimmick while pointing to slowing growth they say will ultimately undermine budget consolidation.

The Socialists lead in opinion polls by a wide margin for a national election due in a year’s time.

Reporting By Andrei Khalip, editing by Axel Bugge

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