UTAO warns that loss of PRR subsidies is harming public accounts

Delays in the implementation of Recovery and Resilience Plan (PRR) projects – namely some high-value investments – are harming public accounts as they have already resulted in the loss of European subsidies (non-refundable subsidies) and, additionally, are leading the State to have to invest money from the Budget so that several major works do not stop.

According to the preliminary assessment by the Technical Budget Support Unit (UTAO) of the proposed State Budget for 2026 (OE 2026), released this Wednesday by the Assembly of the Republic“the pace of implementation of the PRR, particularly in the investment component, has always remained below schedule”.

“The reprogramming approved in 2025 intended to address this fragility, reducing investments in the area of ​​housing and transport infrastructure, in return for the reinforcement of equipment and digital modernization”, say the technicians who advise Parliament on matters of public accounts.

However, “the reprogramming of the PRR focused on the period between 2022 and 2025, with a reduction of 503 million euros (0.2% of GDP – Gross Domestic Product) in subsidies, in return for a greater use of the loan component (501 million euros), which worsens the budgetary result”, warns UTAO.

“This reprogramming only had an impact on national accounts in 2024 and 2025, damaging the budget balance by 503 million euros, forcing the recording of additional capital expenditure, to reflect the reversal of subsidies relating to previous years”.

“This loss of subsidies, with harm to the budgetary resultconstitutes the materialization of a downward budgetary risk previously signaled by UTAO and resulted from the inability to implement the PRR within the expected deadline”, recalls the team of evaluators.

The demanding year 2026

Looking further ahead, the Unit states that “the 2025-2026 biennium will be decisive with regard to the implementation of the PRR and one of the challenges of public finances in the year 2026”.

The budgetary stimulus planned for this period is equivalent to “5% of GDP (15.7 billion euros), with financing mainly provided by grants (4% of GDP), but also by loans (1.1% of GDP), which worsen the budget balance”.

UTAO also notes that, in the new OE proposal, the government “revised upwards the PRR expenditure estimate for 2025 (+ 308 million euros), an objective that appears difficult to achieve, considering the under-execution of the first half of the year (17%)”.

The year 2026 thus appears as “the most onerous for public finances, with the greatest use of loans as a form of financing (1.96 billion euros; 0.6% of GDP)”.

In UTAO’s view, “in addition to the risk of not being able to achieve the targets agreed with the European Union and not being able to execute expenditure at the programmed rate, there is also the possibility of overall under-execution of the PRR, but financing by the loan component may be higher than expected, with a greater worsening of the budget balance”.

This “inability” to achieve the objectives programmed for 2025 “increases the pressure on implementation in 2026, making it impossible to benefit from the subsidies programmed after this time limit”.

Therefore, “the impossibility of achieving the goals agreed with the EU by the end of 2026 implies the review of sources of financing for ongoing projects and the reversal of subsidies already registered”, adding that “the budgetary result may be harmed with retroactive effects, similar to what happened in 2024”, warns UTAO.

For example, according to UTAO, the OE 2026 proposal organized by the Ministry of Finance of Joaquim Miranda Sarmento 2026 “envisages using 941 million euros from the PRR loan component in financial operations, with no impact on the budget balance”, but for UTAP “there is the possibility of mobilizing this amount to finance actual expenditure, with an impact on worsening the balance, which constitutes a risk descending in the biennium 2025–2026”.

Government begins to drop investments

As DN/Dinheiro Vivo reported last June, with the PRR approaching its end, the Government began to drop investments, some of them large.

The National PRR Monitoring Commission (CNA-PRR), chaired by Pedro Dominguinhos, now notes that, within the scope of reprogramming the PRR (something that happens in many European Union countries) Portugal (the government) opted for the “withdrawal of several investments or sub-investments whose implementation proved impossible to achieve”.

These are, in particular, “the Crato Multi-Purpose Enterprise, the Violet Line (Loures-Odivelas) of the Loures Metropolitan, the Pomarão Water Intake, the Algarve Desalination Plant, as well as [a ampliacão] of the building of the Scientific and Technological Center of Madeira (CITMA), in the Autonomous Region of Madeira, and the investment in ships transporting passengers and vehicles in the Autonomous Region of the Azores”.

Furthermore, there is a “reduction in ambition in some investments, such as the Affordable Housing project, the BRT Braga line, Vouchers for Startups, the Coaching 4.0 project, the National Network of Test Beds and the Digital Innovation Hubs (among others)”, adds the CNA.

Another case of withdrawal from the PRR was that of Violet Line, Porto Metrowork that continues to progress, but which will be financed by classic European funds instead of the PRR as they are easier to access and execute over time.

This Wednesday, the Public advanced that “the expansion of Lisbon Metro red line [São Sebastião-Alcântara]” could become one of those “sacrificed” “due to non-compliance with deadlines and withdrawals from the PRR in the next review, which is already underway”.

According to the same newspaper, “there are other works at risk”. “The new Lisbon Oriental Hospital It has also seen its targets reduced, but the Government will be evaluating whether there are still conditions to meet them”, says the diary.