Portugal exceeded the EU's 2025 spending path: Why doesn't this automatically constitute a "budget rule violation"?

Portugal's public spending grew faster than the reference rate agreed with the European Union in 2025.

According to the official assessment of Conselho das Finanças Públicas, net public expenditures increased by 6.4 percent in 2025.

The reference increase determined for Portugal was 5 percent.

However, it is not correct to interpret these figures as "Portugal violated EU budget rules and will face sanctions".

Why did spending increase by 6.4 percent?

According to the CFP calculation, primary expenditure financed by national resources increased by 5.8 percent before taking into account the impact of some revenue measures.

When revenue measures considered as Discretionary revenue measures are included in the EU methodology, net expenditure growth increases to 6.4 percent.

This rate is above the 5 percent path agreed upon by Portugal with European institutions.

Deviation 0.5 percent of GDP

In CFP's calculation, the magnitude of the deviation in 2025 is approximately 0.5 percent of GDP.

The annual reference threshold in the EU financial framework is 0.3 percent.

At first glance, this amounts to overstepping the limit.

However, the system does not evaluate just one year.

Cumulative limit not yet exceeded

When evaluated according to the base year of 2023, Portugal's net expenditure increased by a total of 19 percent until 2025.

The maximum cumulative path agreed with the EU is 17.4 percent.

The cumulative budget deviation created by this is approximately one percent of GDP. 0.5 of it.

The critical point is the cumulative threshold:

0.6 percent.

Portugal is still below this limit.

Therefore, the current figure does not automatically mean that a process similar to the Excessive Deficit Procedure will be initiated.

Portugal still ends 2025 with a budget surplus

The other side of the table is also important.

Portuguese public administrations had a budget surplus of approximately 0.7 percent of GDP in 2025.

This was the country's third consecutive budget surplus.

So two things can be true at the same time:

While Portugal had a surplus in its general budget balance, it may have spent faster than the net spending path determined by the EU.

In the new European fiscal rules, budget balance and expenditure path are different indicators.

Why is it important for OE2027?

This assessment from CFP was published on April 30; In other words, it is not a new data that emerged on October 7.

However, it is gaining importance again during the preparations for OE2027.

While the government increases public salaries, social supports, investments and other expenditures in the new budget, it must also take into account the medium-term expenditure path.

If Portugal's cumulative deviation approaches the 0.6 percent threshold, the room for maneuver in future budgets may narrow.

Therefore the correct title is not “Portugal violated EU budget rules”:

The deviation in Portugal's spending path has increased and approached the EU's cumulative limit.

Resources

Conselho das Finanças Públicas — Parecer relativo ao Relatório Anual de Progresso 2026, 30 April 2026

https://www.cfp.pt/uploads/publicacoes/plano-estrutural/parecer-relativo-ao-relatorio-anual-de-progresso-2026

Conselho das Finanças Públicas — Evolução Orçamental das Administrações Públicas em 2025

https://www.cfp.pt/uploads/publicacoes/evolucao-orcamental/evolucao-orcamental-das-administracoes-publicas-em-2025