Portugal's finance minister says PS budget proposals would turn 2027 surplus into deficit

The government's warning

Finance Minister Joaquim Miranda Sarmento said on Monday, 9 November, that the Socialist Party's (PS) proposals to amend the 2027 State Budget (OE2027) would turn an expected surplus of 0.1% of gross domestic product (GDP) into a deficit of 0.2%. Speaking in Brussels, he put the budget surplus at about 250 million euros. On his calculation, the PS package would leave a deficit of around 500 million euros next year, even if the compensating measures were approved. The package includes a cut to the VAT rate on fuel and food in the first quarter of 2027, a suspension of a planned one-point cut in corporate income tax (IRC), and a reduction of the IRS rate on moderate rents from 25% to 10%. Sarmento also called Chega's proposals unrealistic, but said the PS plan worried him more.

“It is very important that the country maintains a slight surplus, as we have argued since we became government in April 2024.”

He warned that the housing proposals could undo that surplus and turn it into a deficit.

The Socialist response

The PS rejected the claim. Its parliamentary group vice-president, António Mendonça Mendes, told reporters in Parliament on Monday that there was 'no hypothesis' of the PS measures, if approved, pushing the country into a deficit. The party says its proposals cost 480 million euros but generate more than 500 million euros in revenue. He accused the minister of overdramatising and said the measures pay for themselves.

“The only reason there could be for the finance minister to be dramatising is that the finance minister knows something about the budget that we do not know.”

He also disputed Sarmento's claim, made in Parliament on Friday, 6 November, that suspending the IRC cut would affect tax revenue only in 2028, calling the statement 'not rigorous'. Responding to the criticism that the PS offered measures for only three months, he said the minister had not read every proposal, pointing to one that calls for a monthly review of extra tax revenue from inflation above the budget forecast, returned to taxpayers from 1 April 2027.

The housing dispute

On Friday, 6 November, PS secretary-general José Luís Carneiro said in Guarda that his party was ready to build 'a solution' for housing, but only with 'social justice'. A meeting with the government in the week of 2 November, lasting one hour and 45 minutes, ended without agreement on drafting a new rental law from scratch or on the definition of a moderate rent. Carneiro accused the AD, Chega and Liberal Initiative of bringing a rental law to Parliament that leaves the most vulnerable unprotected, including young people, families and older people. He said his party stands with tenants while also wanting to protect owners, though not real estate funds. Carneiro put his position plainly.

“I know which side I am on.”

What the numbers show

The government's draft budget forecasts balanced accounts this year and a surplus of 0.1% of GDP in 2027, with economic growth of 2.3% this year and 2.1% next year.

Current draft budget0.1

With PS proposals-0.2

Current draft budget

0.1 % of GDP

With PS proposals

-0.2 % of GDP

Data from the article text

Sarmento's estimate moves the 2027 balance to a deficit of 0.2% of GDP with the PS package, even if its compensating measures pass. The PS counters that its tax cuts and their offsets cannot be voted separately. The disagreement therefore centres on the IRC effect and the three-month horizon.