Following a Council of Ministers meeting he presided over, Prime Minister Luís Montenegro addressed the nation to unveil a suite of measures designed to tackle critical sectors facing economic challenges, with a particular focus on fuel costs for professional use and the pressing housing crisis.
Montenegro projected an air of confidence, asserting that Portugal stands as an “economic and financial benchmark in Europe,” effectively placing it “in the Champions League of Europe’s economic and financial stability.” He underscored this claim by highlighting Portugal’s proactive stance, stating, “Portugal was the first European country to take measures in response to rising fuel prices.” He recalled the swift action taken in the very first week of the crisis, introducing a cut in the ISP fuel tax whenever fuel prices surged by more than 10 cents. When combined with existing discounts, this has resulted in a current reduction of approximately 20 cents per litre for diesel and around 16 cents per litre for petrol.
Targeted Relief for Professional Sectors
The Prime Minister then announced new, targeted measures specifically for the professional sector. Notably, a long-anticipated VAT cut for these sectors was not included in this package. Instead, the Council of Ministers decided to implement an “extraordinary mechanism for professional diesel” from April 1st to June 30th. This mechanism will provide an additional 10 cents per litre in support, on top of the existing reductions, for diesel used by goods vehicles weighing over 35 tonnes and buses with more than 22 passenger seats. This support is capped at 15,000 litres per vehicle over the three-month period.
Furthermore, extraordinary support has been extended to the agriculture, forestry, and fisheries sectors. This will be administered through IFAP (Instituto de Financiamento da Agricultura e Pescas, I.P.) and will also amount to an additional 10 cents per litre on dyed diesel.
Montenegro clarified that both of these support measures will be activated in weeks where the average fuel price exceeds the level recorded in the week of March 2nd to 6th by more than 10 cents, which was prior to the initial price hikes.
Additional extraordinary support has also been allocated to volunteer firefighters’ associations, taxi companies, and private social solidarity institutions. In total, these fuel-related support measures are estimated to cost around 150 million euros per month.
The Prime Minister emphasised the government’s objective: to alleviate the financial burden on Portuguese citizens while safeguarding the State’s capacity to intervene and adapt individual measures. He stated, “Not to unbalance the public accounts so that we do not throw away our collective effort of years.”
Addressing the Housing Crisis
Beyond fuel relief, the Council of Ministers also approved several structural and strategic instruments aimed at reform and transformation, with a significant focus on the housing sector.
Luís Montenegro highlighted three key initiatives in housing:
Taxation Incentives for Investment and Availability: The first measure centres on taxation, designed to encourage investment and increase the availability of housing. This includes reducing taxes on moderate-level rentals and implementing legislative authorisations passed by Parliament. Specifically, a reduced VAT rate will be applied to building work on primary permanent residences, or on homes intended for moderate-rent rentals, including self-build projects. Additionally, there will be an exemption from capital gains tax on the sale of homes when the proceeds are reinvested in purchasing housing to be let at moderate rents. The government anticipates that, in the medium term, these measures will boost supply in both the rental and ownership markets, thereby helping to moderate prices.
Revision of Urbanisation and Building Legal Framework: The second measure involves a revision of the legal framework for urbanisation and building, which awaits promulgation by the President of the Republic. The goal here is to establish clearer rules, more predictable procedures, and shorter, more agile timeframes. Montenegro explained that “less time means more homes available to the Portuguese, lower costs for those who build and, with that, better prospects for those who buy or rent.”
Special Procedure for Undivided Real Estate Sales: The third initiative introduces a special procedure for the sale of undivided real estate. This measure aims to resolve the deadlock often encountered with undivided inheritances, where numerous properties remain vacant and underutilised, failing to invigorate the market, particularly the rental market. The new regulation proposes that “after two years without division, one or more heirs may force the sale of the property when there is no agreement between them.”
When questioned by journalists about the possibility of a VAT cut for essential food items or the basic food basket, Prime Minister Luís Montenegro made it clear that no such measures are currently under consideration.
