In a televised address on Thursday evening, Portugal's prime minister, Luís Montenegro, presented a package of measures to cushion households from rising prices, particularly fuel costs. The speech, timed to coincide with prime-time news bulletins, was both a policy announcement and a political statement, with Montenegro declaring: "Here I am, putting myself on the line."
The package, formally approved by the Council of Ministers, includes a one-off pension bonus, a reduction in personal income tax (IRS) brackets, and an extension of fuel tax discounts. The pension bonus will be paid in December: €200 for pensions up to €537, €150 for pensions up to €1,704, and €100 for pensions up to €1,611. The IRS reform, which still needs parliamentary approval, will cut rates across six brackets, with the prime minister emphasising that it is aimed at "middle-class households."
Fuel relief and targeted support
On fuel, the government will maintain its discount on the petroleum products tax (ISP) until the end of the year, with a total cost of around €1.3 billion. Montenegro indicated that the discount could rise from 23 cents to 25 cents per litre as early as next week, in anticipation of further price increases. The government will also allocate €38 million to support sectors most exposed to fuel costs, including taxis, freight transport, social solidarity institutions, firefighters' associations, and farmers. The subsidised "solidarity gas bottle" scheme will continue.
As part of the package, the green rail pass—which allows unlimited travel on most train lines for €20 a month—will be extended to the urban areas of Lisbon and Porto, excluding the high-speed Alfa Pendular service.
No VAT cuts, despite pressure
Montenegro used the address to draw a clear line on tax policy: he will not reduce VAT on essential food items, a measure demanded by the Socialist Party (PS) and the far-right Chega, and already adopted by several EU countries. "I will not swap cutting VAT on some foodstuffs from 6% to zero for the 800 million euros we are returning to families through IRS and the pension supplement," he said.
He acknowledged the choices of other leaders, saying: "I have every respect for the choices of the opposition and for the choices of my fellow heads of government in the European Union. I will not trade our fiscal and financial policy for that of other countries, even those closest to us, such as Spain, France or Italy." The comparison with Spain is particularly sensitive, as cheaper fuel across the border has led Portuguese drivers to fill up there.
Montenegro repeatedly invoked Portugal's past international bailout, warning against short-term fixes that could lead to long-term pain. "Do not count on me, or on the government, for illusions today that will carry a heavy price to be paid tomorrow," he said.
The prime minister also acknowledged that the current economic strain may persist. Earlier in the day, he had criticised the "stupid" course of the conflict in the Middle East, which has contributed to global energy price volatility.
The package reflects a broader European debate on how to respond to the cost-of-living crisis. While some governments, like Spain and France, have opted for VAT reductions, Portugal is betting on targeted income support. The approach is not without risks: the IRS measure still needs parliamentary approval, and the opposition has already signalled it will push for more direct relief.
For now, Montenegro's message is one of fiscal prudence and political resolve. Whether it will be enough to ease the pressure on Portuguese households—and on his minority government—remains to be seen.
