Portugal's new government warns previous administration's spending may widen deficit

Now, Miranda Sarmento said, the new administration is making "an exhaustive inventory" of the potential cost of over 100 measures approved by its Socialist predecessors between November, when former Prime Minister Antonio Costa resigned, and March, when the country held a general election, he said. His ministry said on Tuesday that the country had swung to an unexpected public deficit of 259 million euros ($276 million) in the first quarter from a surplus of 5.1 billion euros a year ago, blaming the previous government's last-minute measures.

By Sergio Goncalves LISBON, May 2 (Reuters) -

Portugal's new centre-right government said on Thursday the public deficit is likely to widen further once it has finished assessing spending approved by the previous administration during its final months in power. "Public accounts are much worse than what the previous government proclaimed as a great budget result," finance minister Joaquim Miranda Sarmento told a news conference.

Last year, Portugal posted a budget surplus of 1.2% of gross domestic product - the country's strongest in the 50 years of democracy. Now, Miranda Sarmento said, the new administration is making "an exhaustive inventory" of the potential cost of over 100 measures approved by its Socialist predecessors between November, when former Prime Minister Antonio Costa resigned, and March, when the country held a general election, he said.

His ministry said on Tuesday that the country had swung to an unexpected public deficit of 259 million euros ($276 million) in the first quarter from a surplus of 5.1 billion euros a year ago, blaming the previous government's last-minute measures. "In reality, the budget deficit is almost 600 million euros," Sarmento said, explaining that another 300 million euros of orders with suppliers, which was incurred in the first quarter but has not yet been paid, had to be added.

He said Costa's government approved total exceptional expenses worth 1.08 billion euros in the first quarter, and had already spent almost half of the budget's 500-million-euro cushion for unexpected expenditure. Former socialist Finance Minister Fernando Medina told reporters that "the country does not have any budgetary problems" and Miranda Sarmento's statements either "reveal unpreparedness or are falsehood in the service of politics".

The new government has predicted a budget surplus of 0.3% of GDP this year, basing its projections on unchanged policies and without including the impact of its own measures such as tax cuts. Costa resigned over an investigation into alleged illegalities in his administration's handling of lithium and hydrogen projects, triggering an election that in March produced an even more fragmented parliament and brought to power a shaky government led by Social Democrat Luis Montenegro. Costa has denied wrongdoing and has not been charged with any crime.

($1 = 0.9369 euros)

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