Portugal says budget balance 'extremely difficult' after huge storm costs

Portugal's Finance Minister Joaquim Sarmento told an economic forum in Lisbon that the direct budgetary burden of the severe storms and floods that hit the country from March to May was estimated at around EUR 1.8 billion on preliminary accounting data. Sarmento said 'the budget balance target we set for year-end has reached an extremely difficult point; we are looking for ways to continue the recovery programme without compromising financial discipline'.

The centre-right coalition led by Prime Minister Luís Montenegro had projected a 0.1 per cent budget surplus for fiscal 2026. Infrastructure damage in the Algarve and Setúbal regions, agricultural losses and uninsured property damage in the worst-case scenario could reach EUR 2.4 billion. European Commission Director-General for Economic Affairs Maarten Verwey said that 'accelerating EU Resilience and Recovery Fund allocations earmarked for climate damage to Lisbon is on the agenda'.

Portugal's 10-year bond yield rose 8 basis points after the news to 3.38 per cent; spreads in other Iberian peninsula economies also widened slightly. Bank of Portugal Governor Mário Centeno said the Eurogroup will discuss the climate-finance framework at its meeting on 17 June in Brussels. A structural disaster insurance reform is expected to be presented to parliament by year-end.