European Commission Pegs Portugal's 2027 Net-Expenditure Deviation at 2.1% of GDP — Eurozone's Second-Worst Slippage Trails Only France in the 4 June European Semester Package

The European Commission's spring European Semester package, released in Brussels on Thursday 4 June 2026, projects that Portugal will miss its agreed net-expenditure ceiling by a cumulative 2.1% of GDP by the end of 2027 — the second-largest cumulative slippage anywhere in the eurozone, behind only France. The reading lands seven weeks after Finance Minister Joaquim Miranda Sarmento filed Portugal's Annual Progress Report (RAP, Relatório Anual de Progresso) in April claiming compliance with the country's medium-term spending path.

Net expenditure — the EU's binding fiscal indicator since the 2024 Stability and Growth Pact reform — strips out interest costs, discretionary revenue measures, EU-funded items, cyclical-unemployment effects, and one-off spending. Member states agreed individual net-expenditure ceilings inside their medium-term plans; for Portugal, the 2027 ceiling sits at 1.2% growth. The Commission now forecasts actual 2027 net spending to rise 5.6% — a 4.4 percentage-point overshoot for that single year, on top of cumulative drift already booked in 2025 and 2026.

The 0.3 and 0.6 thresholds that now trigger a procedure

Under the reformed pact, annual deviations above 0.3 percentage points of GDP, or cumulative deviations above 0.6 percentage points, trigger the Significant Deviation Procedure (SDP) — a more political cousin of the Excessive Deficit Procedure. Portugal's projected 2.1% cumulative drift sits more than three times the cumulative threshold, even after the new defence-spending flexibility clause is applied (which lets eurozone states book up to 1.5% of GDP in extra defence outlays without counting them against the ceiling).

France leads the eurozone scoreboard with what the Commission flags as a 36.5% deviation profile through 2028, reflecting Paris's near-runaway debt trajectory. Portugal sits second among states that initially looked compliant when their medium-term plans were endorsed in late 2024. Ireland prints the best position with a negative deviation of –4.1%, meaning Dublin is spending well below its agreed envelope.

What the Finance Ministry said in April — and what changed since

The April RAP submitted by Miranda Sarmento to Brussels asserted that Portugal would meet its medium-term net-expenditure goals, citing strong nominal growth and the on-track delivery of the Plano de Recuperação e Resiliência (PRR, Recovery and Resilience Plan). Since then, three things have moved against that read: the 5 June Council of Ministers tripled the Instituto da Habitação e da Reabilitação Urbana (IHRU, Housing and Urban Rehabilitation Institute) envelope to €1.85 billion through 2030; the Prestação Social Única (PSU, Single Social Benefit) reform is heading to parliament with a wider cost base than the initial RAP modelled; and pension indexation, which is contractually tied to inflation and real GDP, is set to step up automatically in January 2027.

What a Significant Deviation Procedure would look like

If the Council of the EU, on the Commission's recommendation, opens an SDP against Portugal in 2027, the procedure would require Lisbon to file a corrective trajectory inside its next medium-term plan and accept enhanced monitoring. The political cost — landing in the same procedural basket as France — would be heavier than the technical one. The next checkpoint comes in November 2026, when the Commission's autumn forecast updates the trajectory and Member States submit their Draft Budgetary Plans for 2027.

For residents and households, the immediate effect is muted: no automatic spending cuts, no tax changes. The slow-burn implication is that the 2027 Orçamento do Estado (OE, State Budget), expected to be tabled in October 2026, will be drafted under tighter Brussels scrutiny than any Portuguese budget since the post-troika cycle.