Portugal's Budget Battle: Balancing Growth, Surplus, and Tax Cuts

Portugal's centre-right government introduced its first budget, aiming for growth and a surplus, despite tax cuts and wage hikes. A failure to pass could collapse the government. Key proposals include tax exemptions for young workers and reduced corporate tax rates to support the economy and investment.

Portugal's centre-right minority government unveiled its inaugural budget on Thursday, forecasting an economic upturn and a modest surplus while incorporating tax reductions for youth and enterprises alongside public sector wage increases.

This move is fraught with high stakes, as the budget's rejection could result in the government's downfall, triggering the country's third snap election in as many years.

Finance Minister Joaquim Miranda Sarmento introduced measures appealing to the opposition, such as a modest corporate tax reduction, aiming to avert a political deadlock.

Efforts to prevent youth emigration include a 100% tax exemption in their first working year, diminishing to 25% over a decade. The budget envisages a 2.1% economic growth by 2025, surpassing the euro area's forecast.

Despite failing to secure a deal with opposition parties, Prime Minister Luis Montenegro remains optimistic about the budget's approval, with further negotiations anticipated before the initial vote on October 31.

(With inputs from agencies.)