Prime minster warns that Portugal could go back to the red because of the storms and war in Iraq

Portugal’s Prime Minister, Luís Montenegro has warned that the government may have to dip into the red this year because of payouts resulting from the January storms and the indirect costs of the continuing crisis in the Middle East.

However, he insists that the national economy will not be subjected to an excessive deficit and that he is not obsessed with recording a surplus in public accounts.

“We are not obsessed with this. We try to have a positive budget balance, but we want a country that is socially fair and economically thriving. And whatever we have to do to reconcile these two factors will be done”, said Luís Montenegro speaking to journalists as he went in to Thursday’s European Council meeting which took place in Brussels.

His statements can be interpreted as an aside to former PSD prime minister Pedro Passos Coelho who had been criticised during the ‘Troika’ period after 2011 for trying to go well beyond the demands of the Troika itself during the sovereign debt crisis.

In a recent interview with the online news source ECO, Pedro Passos Coelho criticised the policy directions of the government as well as the instability in Portugal’s parliament and the country’s capacity to carry out structural reforms.

There will be little time left to know the result of last year’s budget balance. The head of Government’s expectation is that it will be positive, an ambition he maintains for 2026, despite “two unforeseen circumstances”. “Our conviction is that it is still possible to safeguard the budgetary framework in order to have a positive result”, he stated.

But while admitting a possible deficit situation at the end of this year, Luís Montenegro said that the government could still “balance” public accounts.

“Running a deficit does not mean having an imbalance”, he stressed and rejected that Portugal would suffer an “exaggerated financial hammering just to get a surplus”.

Source: Eco Online; Credits: epa12834867 Portuguese Prime Minister Luis Montenegro speaks during a press briefing at the end of a formal meeting of the members of the European Council in Brussels, Belgium, 20 March 2026. Leaders discussed the situation in the Middle East, including Iran, continued support for Ukraine, European competitiveness, defence and migration amid rising geopolitical and economic tensions. EPA/OLIVIER HOSLET
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