ECB’s Constancio ‘Understands’ Portugal’s Request on Deficit

Portugal’s decision to ask for more time to narrow its budget deficit is justifiable given that other countries have done the same, European Central Bank Vice President Vitor Constancio said.

“There are many recent precedents in relationship to Spain and France,” Constancio told reporters in Brussels today. “Judging from the precedents, the issue is pertinent and I understand the position the government took on this matter.”

Portuguese Finance Minister Vitor Gaspar said on Feb. 20 that Portugal may get an additional year to narrow its budget deficit as the country’s economy remains mired in recession. Last year, Gaspar announced an “enormous” increase in taxes to narrow the budget deficit to 4.5 percent of gross domestic product in 2013 and below the European Union’s 3 percent limit next year.

Constancio, a former Bank of Portugal governor, said it would be up to the European Commission and not the ECB to decide on granting Portugal more time to cut the budget deficit. Officials from the European Commission, the ECB and the International Monetary Fund are currently in Lisbon to carry out the seventh quarterly review of Portugal’s 78 billion-euro ($102 billion) aid program.

“This is not a problem of creditors, it is a problem of rules the commission has to interpret and decide upon,” Constancio said.

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