PARIS (MNI) – Portugal’s next government will not only respect “all
the objectives” spelled out in the bailout program of the European Union
and the IMF but will surpass them in terms of privatization, budget
cutting and transparency, prime minister-elect Pedro Passos Coehlo said
in a newspaper interview published Tuesday.
“We must surprise on the upside,” Coehlo, leader of the
center-right Social Democrats, told the French business daily Les Echos.
Portugal will meet its deficit targets despite a recession because “we
don’t have any alternative,” he said. “We absolutely must regain market
confidence in Portugal.”
He promised his government would be “absolutely transparent with
regard to the markets.” To show it is serious, its “first measure” will
be to create a new budget authority that is independent of the
government, Coelho said. The new institution will be created by the Bank
of Portugal and the Court of Auditors, “the two independent institutions
in Portugal,” he said.
This authority will be composed of “independent personalities,
including foreigners, in order to be totally transparent with regard to
budget consolidation, as well as the finances of companies owned by the
state, the regions and municipalities,” Coelho said. “It will have very
broad powers.”
Coelho’s party scored a convincing victory in Sunday’s election,
easily defeating the Socialist Party of caretaker Prime Minister Jose
Socrates. Socrates will step aside and relinquish the leadership of the
Socialists. Coelho’s Social Democrats will govern in a coalition with
the conservative-leaning Democratic and Social Center Party (CDS) as
their junior partner.
In May, Portugal signed up for E78 billion in bailout funds from
the International Monetary Fund and the European Union in exchange for a
pledge to implement a series of long-term reforms, raise VAT,
recapitalize banks, sharply cut public spending and reduce the country’s
burgeoning budget deficit. Lisbon is expected to narrow the fiscal gap
to 5.9% of GDP this year, from 9.6% in 2010; then to 4.5% in 2012 and 3%
— the EU’s allowable limit — by 2013.
The incoming prime minister said his government would encourage the
Portuguese people to accept the sacrifices being asked of them because
it would lead by example. “If the Portuguese pay more taxes and we ask
them to economize more, then the next government should also economize
more than the previous one,” he said. “We must very quickly rationalize
the public sector and the companies held by the state. There is a lot to
do. We can’t allow ourselves to fail.”
Coelho said that because internal demand will not create economic
growth in the short term, the country is “expecting a lot from external
demand.” He promised to stimulate exports, in part by lowering the cost
of labor for Portuguese exporters. “That will be a way to regain export
competitiveness. We have no other way, since we are in the Eurozone.”
Coelho said his government would try to distinguish itself in the
eyes of financial markets from the government in Athens. “I hope that
our actions, more than our words, will make the difference between
Portugal and Greece,” he said.
–Paris newsroom, +331-42-71-55-40; bwolfson@marketnews.com
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