European Commission Vice President Valdis Dombrovskis

In a letter signed by Vice President Valdis Dombrovskis, addressed to the Ministry of Finance, the European Commission addresses “some implications” of the rejection of the State Budget for 2022, in the execution of the “Recovery and Resilience Plan (PRR) and support for emergency for the mitigation of risks of unemployment (SURE)”.

Bazooka

The letter addressed by Minister João Leão, Brussels asks the “Portuguese authorities” to indicate “as soon as possible” to the European Commission services, “possible future difficulties” that jeopardize “the satisfactory and timely fulfillment” of the PR

“The PRR is a performance-based instrument and payments under it are associated with the satisfactory fulfillment of the relevant milestones and targets defined in the Council’s Implementing Decision on the approval of Portugal’s recovery and resilience plan”, recalls Dombrovskis, pointing out to the importance of “minimizing the risk of unnecessary delays”.

Brussels also asks for clarification on the “impact” of the rejection of OE2022 “on the management of public finances in Portugal, in particular, those relating to the application of the ‘transitional budget execution regime’ under the terms of the Portuguese Budget Framework Law”.

SURE

Dombrovskis reminds João Leão that “in June 2021”, Portugal communicated to the Commission “a lower total public expenditure than expected”, with the measures eligible in the temporary support plan, to mitigate the risks of unemployment during the pandemic.

Brussels authorized the plan to be revised to maximize the absorption of funds. “Exchanges are ongoing between you and the Commission services regarding the preparation of a proposal to amend Council Implementing Decision (EU) 2020/1354”, reads the letter dated 11 November.

“In this context, we would be grateful if you could clarify what implications the rejection of the 2022 State Budget bill could have on the process of changing the decision (…) and, more generally, on the capacity to absorb Portugal the maximum loan amount granted by the Council under SURE”, requests Dombrovskis.

Debt

In the same letter, the vice president of the Commission with the economic portfolios confirms that he will not analyze the Draft Budget Plan for 2022, as it “is no longer valid”, as it was rejected.

“Based on this understanding, the Commission does not intend to adopt an opinion on the Draft Budget Plan for Portugal for 2022, dated October 15, 2021”, the letter reads.

“This is without prejudice to the fact that the Commission continues to closely monitor Portugal’s economic and budgetary situation, also in light of its high public debt-to-GDP ratio.”

“We invite”, the Portuguese authorities “to present, in due time, to the Commission and the Eurogroup” a new Budget Plan for 2022 and “as soon as a Government presents to the Assembly of the Republic a new draft Law on the State Budget for 2022”, the letter reads.

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