Brussels, 14/03/2014 (Agence Europe) - In Brussels on Friday 14 March, the Portuguese secretary of state for structural reforms, Carlos Moedas, explained the progress made in his country now that it is planning its aid programme exit strategy for May.
Moedas said Portugal would meet its side of the contract, citing measures for simplifying business life through application of the services directive (a national compliance scheme), reforming the judicial system, scrapping incumbency payments in telecoms and pharmaceuticals, and making the labour market more flexible (a single contract and adjusting working hours in line with the economy).
Would introducing structural reforms simultaneously in the EU have a negative impact on the European economy? No, said Moedas, arguing that the lack of structural reforms in other countries worked to the detriment of Portugal. Countries that are part of a monetary union can introduce reforms, but with enormous sacrifices for their population, he added, noting that the reforms could increase the share of the cake to be divided up over the long-term and were the only way to preserve the social model that is only found in Europe.
In 2014, Lisbon is expected to emerge from recession, with growth of 0.8% after a contraction of GDP in 2013, according to the European Commission's winter economic forecasts. Portugal's public deficit is expected to be 5.9% of GDP in 2013 and 4% in 2014, hence in line with the trajectory set out in the aid programme. Moedas said that Portugal does not spend all that it earns and will have a primary budget surplus (not including debt servicing) of 0.3% of GDP in 2014. The countries banks have been consolidated with a CET1 solvency ratio of above 12% and a borrowing/saving ratio of close to 120).
Public debt, on the other hand, has gone through the roof, rising from 10% in 1996 to nearly 130% of GDP in 2013. Despite better figures in the summer, unemployment is expected to rise further in 2014 and reach 16.8%.
An export-led economy. The structural adjustment programme has fundamentally altered the structure of the Portuguese economy, which now relies on export growth. From 2010 to 2013, Portuguese exports grew by nearly 25%, with imports over the same period falling by around 3%, explained Moedas. Exports now account for around 40% of Portuguese GDP.
The secretary of state did not comment on how the Portuguese government is planning to exit the aid programme that they have been applying since 2011 in exchange for financial aid of €78 billion (€26 billion of it from the International Monetary Fund). The decision about whether to follow in Ireland's footsteps and make a clean break from the programme or instead to request a preventative credit line from the European Stability Mechanism will not be taken until the last minute. (MB)