Portuguese prime minister outlines plan to tackle rising living costs without changing VAT

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Published: 2026-09-18T10:20:29.616Z • Permanent link

Luís Montenegro, the Prime Minister of Portugal, has outlined a comprehensive plan to tackle the rising living costs faced by the country's citizens. This announcement comes amidst a backdrop of economic uncertainty, with inflation rates exceeding the European Union's average of 3.4%. Montenegro's proposal, which was unveiled during a televised address, emphasizes the need for targeted measures to address the cost of living crisis, rather than resorting to drastic policy changes such as lowering the consumption tax, known as Value Added Tax (VAT).

The Prime Minister's plan centers around a multi-faceted approach, which includes measures to reduce energy costs, increase funding for social welfare programs, and implement policies to support small businesses and entrepreneurs. These initiatives aim to alleviate the burden on low-income households, who are disproportionately affected by the rising cost of living. Data from the Portuguese National Institute of Statistics (INE) reveals that the cost of living index has increased by 10.3% over the past year, with housing, food, and transportation costs driving the majority of the growth. Montenegro's administration has pledged to work closely with various stakeholders, including businesses, civil society organizations, and the public sector, to ensure the success of the plan.

Portugal's economic woes are not unique to the country, as several European nations are grappling with similar challenges. However, Montenegro's approach stands out for its focus on targeted interventions, rather than broad-based austerity measures. His government has already taken steps to address the energy crisis, introducing measures to increase the use of renewable energy sources and reducing energy consumption in public buildings. These efforts are expected to have a positive impact on the environment, as well as helping to mitigate the cost of living crisis.

The impact of Montenegro's plan on the Data Sources domain cannot be overstated. Companies such as Siemens and Schneider Electric, which have significant operations in Portugal, are likely to benefit from the government's efforts to increase the use of renewable energy sources. This could lead to increased demand for their products, particularly in the renewable energy sector. Research communities, such as the Portuguese Institute for Energy and Geosciences (IEGE), will also be closely monitoring the implementation of the plan, as it provides valuable insights into the effectiveness of targeted interventions in addressing the cost of living crisis.

The policy environment in Portugal is also expected to be influenced by Montenegro's plan. The European Commission has been closely monitoring the country's economic situation, and the implementation of the plan is likely to be subject to scrutiny. This could lead to increased pressure on the government to implement additional measures, or to modify the existing plan to better align with EU policies. For policymakers in the Data Sources domain, this provides a unique opportunity to study the impact of targeted interventions on the cost of living crisis, and to inform future policy decisions.

The plan announced by Montenegro is part of a larger pattern of economic policy responses to the cost of living crisis in Europe. Other countries, such as Germany and France, have implemented measures to support low-income households, while also addressing the root causes of the crisis. However, the approach taken by Montenegro's administration stands out for its focus on targeted interventions, rather than broad-based austerity measures. This approach is consistent with the historical comparison of Portugal's economic policies, which have traditionally emphasized social welfare and investment in human capital.