Portugal's new government vows to keep balanced budgets, privatise TAP

Prime Minister Luis Montenegro's centre-right Democratic Alliance (AD) coalition won the March 10 election by a slim margin, and analysts expect his government to be shaky in a fragmented parliament. Under the previous Socialist administration, Portugal swung to a stronger-than-expected budget surplus of 1.2% of GDP last year from a deficit of 0.3% in 2022.

Portugal's new minority government will maintain balanced budgets, keep reducing the country's public debt and carry out a long-planned privatisation of flag carrier TAP, it said in its inaugural legislative programme on Wednesday. Prime Minister Luis Montenegro's centre-right Democratic Alliance (AD) coalition won the March 10 election by a slim margin, and analysts expect his government to be shaky in a fragmented parliament.

Under the previous Socialist administration, Portugal swung to a stronger-than-expected budget surplus of 1.2% of GDP last year from a deficit of 0.3% in 2022. While the Socialists had predicted a surplus of 0.2% this year, the new government provided no specific forecasts.

It did not immediately specify whether it was planning to sell the whole of TAP, or a stake in the airline. Montenegro told Reuters in December he intended to fully privatise TAP. The previous government approved the sale of at least 51% of TAP in September, but the process was stalled. The privatisation has already attracted interest from Lufthansa, Air France-KLM and British Airways owner IAG.

The overall plan, which also includes tax reductions for families and companies, higher pensions and wage hikes for police, teachers and doctors, will be debated in parliament later this week. If no party presents a motion of rejection, it is automatically approved. Cabinet Affairs Minister Antonio Leitao Amaro told reporters the government plan included 60 proposals from other parties' electoral programmes.

"It is a government programme for change, but based on dialogue," he said. "The government is completely committed to the goal of budgetary responsibility." With just 80 seats in the 230-seat legislature, the AD will need the support of either the far-right Chega party, which quadrupled its parliamentary representation to 50 lawmakers, or the centre-left Socialists, which secured 78 seats, to pass legislation.

Montenegro has repeatedly refused to negotiate a long-term deal for support with the anti-immigration Chega, whose fast rise reflects a political tilt toward right-wing populism across Europe. Analysts expect the government's first big survival test to be the 2025 budget bill towards the end of the year. Failure to approve a budget has in the past habitually resulted in early elections in Portugal.

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