Brussels, 02/05/2014 (Agence Europe) - Portugal has passed the troika's final assessment (the troika being the European Commission, European Central Bank and International Monetary Fund) and is about to become the second eurozone country to exit its aid programme. On Monday 5 May, the Eurogroup will discuss the completion of the Portuguese aid plan and take note of the government's decision on how the exit will take place (see EUROPE 11068).
The troika's mission began on 22 April and ended on Thursday evening after lengthy talks. The troika's positive assessment paves the way for the final aid payment of €2.6 billion to be disbursed, of the total package of €78 billion agreed upon in March 2011 in return for a structural adjustment programme. Portugal is ready to exit the bailout programme on 17 May.
The troika of lenders said on Friday 2 May that Portugal had rigorously implemented the structural adjustment programme, but called for reforms to continue. The troika commented: “The economic recovery is broadening. Exports continue to drive economic growth, while private investment and consumption have also started to pick up. Unemployment is expected to decline further, in line with the moderate economic recovery expected in 2014 and 2015”.
The troika added that “the programme remains on track to be concluded, following the completion of this final review. The programme has put the Portuguese economy on a path towards sound public finances, financial stability and competitiveness. This is the outcome of solid programme implementation which at times has implied unavoidable sacrifices by the Portuguese people. During the past three years, the external current account has moved from a substantial deficit into surplus, the budget deficit has been more than halved, and public debt sustainability has been maintained. There have been ambitious reforms across all the main sectors of the economy. Measures have also been taken to improve labour market flexibility”. The troika warned that the currently favourable economic and financial environment must not give rise to complacency.
The lenders stressed that “with the programme ending, it will be essential that Portugal commits to sound economic policies for the medium term”.
Portugal will officially exit the aid programme on 17 May and, on Sunday, the government will announce whether it will be asking its European partners for a preventative credit line as a precautionary measure or whether it will return to the markets unaided, as did Ireland in December. Without commenting on the type of exit to be chosen, the troika pointed out that Portugal's access to the money markets has markedly improved against a backdrop of strong investor demand and a sharp fall in interest rates.
At a press conference, the Portuguese deputy prime minister, Paulo Portas, said the twelfth assessment had been overcome and this paved the way for conclusion of the aid programme. He said the country had made the journey to recover its financial autonomy.
Portugal's welcoming of the departure of the troika does not mean the end of austerity. On Wednesday, the government unveiled a three-year budget strategy confirming the belt-tightening although relaxing somewhat the demands on pensioners and civil servants. (LC)