Portugal proposes diesel subsidy to mitigate Iran war energy cost

Portugal Proposes Diesel Subsidy to Offset Soaring Energy Costs from Iran War

Government Response to Rising Fuel Prices

By Sergio Goncalves

Details of the Proposed Diesel Subsidy

LISBON, March 27 (Reuters) - Portugal proposed a temporary subsidy of 10 euro cents per litre on diesel for key sectors such as agriculture and transport on Friday to ease fuel cost increases due to the Iran war.

Cost and Conditions of the Subsidy

The subsidies could cost up to 450 million euros ($519 million) over three months, but will only apply if diesel prices remain more than 10 cents above the average for the first week of March, when the war in Iran intensified, the government said.

Eligible Sectors and Duration

The subsidies, which will run from April 1 to June 30 and still need parliamentary approval, will support sectors such as agriculture, forestry, fishing, public transport and taxis, and will be capped at a fixed diesel consumption limit per vehicle.

Government Fiscal Policy and Future Measures

Prime Minister's Statement on Fiscal Responsibility

Prime Minister Luis Montenegro said the support was temporary and highlighted the need to continue managing the state budget responsibly and prudently.

Budget Surplus and Economic Outlook

Portugal posted a wider-than-expected budget surplus of 0.7% of gross domestic product last year, up from 0.6% in 2024, the National Statistics Institute (INE) said on Thursday. It forecast a surplus of 0.1% in 2026.

Potential for Additional Support Measures

The government is studying additional support measures should the conflict in Iran escalate and put further pressure on fuel and essential goods prices, Montenegro said.  

No Plans for VAT Reduction

There are no plans to reduce VAT on fuels or food, he added.

Additional Information

($1 = 0.8675 euros)

(Reporting by Sergio Goncalves; editing by Charlie Devereux and Alexander Smith)