The sale of Banif bank just before Christmas has created a hole of at least 2.2 billion euros, which translates into around one percent of the Gross Domestic Product.
With the taxpayer being forced to absorb the cost, which will see the budget deficit climb from a respectable three percent to a more disconcerting four percent, the Socialist government’s anti-austerity posture will be tested to the limit in 2016.
There will also be a constant cloud hanging over the stability of the minority government and its ability to pass legislation.
The first signs of a lack of unity in the leftist alliance came in the week leading up to Christmas when the Communists and the Greens said they could not support a motion that amounted to bailing out yet another bank.
The sale of Banif was only secured with the support of the PSD, whose leader, Passos Coelho, had in November warned the Socialists that the only occasion it would stay in power, is if it were deemed to be in the nation’s best interests.
The position of the far left was perhaps a calculated risk, knowing the right would support a revision to the 2016 state budget by making provision for Banif’s sale. But only the coming 12 months will tell whether the Socialists will be able to stay up or go down and avert early elections with the support of either the left or the right when it comes to passing contentious legislation.
In the meantime, the Socialists will be implementing measures that will be welcomed by the majority as from the beginning of January.
The increase in the national minimum wage from 505 euros to 530 will boost hundreds of thousands of workers when they collect their January pay cheque, with this value set to increase by a further 27 euros in 12 months’ time.
The reduction of VAT on restaurant bills will also come into effect, with the drop from 23 to 13 percent set to aid numerous ailing businesses in the food and beverage industry.
Whether this cut will translate into actual cheaper prices for patrons appears unlikely, though price hikes at restaurants, bars and cafés will now most certainly be harder to justify.
The golf industry has also called for a similar reduction, with the Algarve Tourism Board spearheading the latest attempt to have VAT on golf rounds reduced from its current figure of 23 percent.
Tolls on previously unpaid motorways, such as the Algarve’s A22 are also set to be altered in the coming year.
While there is still discord as to whether they should be reduced by 50 percent or be totally abolished, the worst case scenario appears to be a substantial cut in costs for motorists.
The immediate future of motorists at fuel pumps will also be one that fits in with the festive mood. With the cost of diesel presently nearing the 90 cent a litre mark at some forecourts, drivers are now saving up to 50 percent on a tank of fuel when compared with certain stages in 2014.
However, 1 January will see the government introduce a token fuel surcharge of €0.005/litre for petrol and €0.0025 for diesel.
Another positive feature of 2016 will be that social benefits are set to creep upwards.
The Labour and Welfare Ministry has done away with the five-year old practice of freezing pensions and family benefits, which are now set to rise in accordance with inflation.
However, pensioners will only reap the benefits of this change should they earn less than 628 euros a month.
The extraordinary surcharge of 3.5 percent on all wages is also expected to be revised or eliminated in 2016.
The measure was introduced at the beginning of 2015 on all wages above the minimum wage.
But the Socialist government is aiming to fully eliminate the levy on taxable earnings up to 7,070 euros per year, with a one percent charge in effect through to 20,000 euros, rising to 1.75 percent for earnings up to 40,000 euros, three percent through to 80,000 euros and the remainder, which is set to amount to 12,000 households, at 3.5 percent on earnings.
But not all prices will be going down. Electricity, rents and telecommunications are all set to be increased in the first days of the New Year.
Bread will also be subject to an increase, going up by between two to three percent, though this should have very little effect to the consumer, with the actual price only rising by around half a cent for a standard bread roll.
Electricity will be hiked by 2.5 percent for domestic consumers, which has been calculated to translate into a monthly increase of around 1.18 euros, bearing in mind the value of average monthly bills (47.60 euros).
The country’s major telecommunication operators have also announced increases averaging 2.5 percent, which will come into effect by 13 January.
Projected increases are available on the websites of all the major operators.
In the meantime, the sceptics will be pointing to a year where consumers could see a drop in their disposable income due to the additional measures the government might be forced to implement due to widening financial holes resulting from incidents such as the Banif debacle, while at the other end of the spectrum, optimists will be pointing to rising consumer confidence, already seen from provisional Christmas sales figures as the start of the country spending itself out of the five-year-old financial crisis.