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Portugal parliament approves surplus-aimed budget bill in first reading

By Victoria Waldersee

LISBON (Reuters) – Portugal’s parliament approved the minority Socialist government’s draft 2020 budget in its first reading on Friday, setting the course for the first fiscal surplus in 45 years of democracy.

The bill was passed by 108-86 votes with 36 abstentions.

Only the Socialist bench voted yes, but that was enough to deliver the government’s first major win after Prime Minister Antonio Costa’s reelection in October and his decision not to renew an alliance with the far left.

The bill will now go to committees for further discussions and possible changes before a final vote scheduled for Feb. 6.

The highlight of the budget is an envisaged surplus of 0.2% of gross domestic product, providing an extra push to alleviate Portugal’s public debt burden, which fell from 130% during the 2011-2014 crisis to 118.9% in 2019 but remains one of the highest in the euro zone.

Measures include a reduction in company tax for small and medium-sized companies, income tax reductions for families with children up to three years old, and an injection of 800 million euros into the health service.

Responding to critics who doubt the government’s projections, such as steady economic growth of 1.9% this year amid a slowdown in Europe, Centeno defended them as realistic.

“Budgetary policy is not a betting house,” he said.

After years of tightening the purse strings in favor of restoring fiscal credibility, the bill reinforces public investment by 600 million euros to 1.35 billion euros – but for Portugal’s left-wing parties, this is a drop in the water.

“We know you prioritize the surplus, but it is the other ministers who bear the brunt of the train that’s not running, the school that doesn’t exist,” said lawmaker Mariana Mortagua from the Left Bloc party that was allied with the Socialists in their previous term, along with the Communist Party.

Still, Portugal’s left-leaning parties including the Left Bloc facilitated approval of the bill by abstaining. Only right-leaning parties voted against.

“Portugal will finally stop living at the cost of taxes paid by future generations,” Finance Minister Mario Centeno told lawmakers before the vote, adding that the budget with a surplus would bring more stability and investment.

(Reporting by Victoria Waldersee; Editing by Andrei Khalip, Frances Kerry and Nick Macfie)