Portugal’s plea for credibility

COMMENT: ‘My goal is to convince you that Portugal is following a positive growth path,’ the Portuguese finance minister, Vitor Gaspar (pictured) told a public audience in London yesterday evening.

Rewind five years. The euro then was a currency built of economic equals, with less well-off members having a number of projects funded by the European Commission, mostly entitled ‘environmental’, ‘youth’ or ‘social’.

That an EU finance minister would have to convince international audiences, as well as markets, of their country’s growing economy would have been politically unacceptable.

You don’t talk about debt or budgets around a family table. Europe, at the launch of the euro in 1999 did not have ‘poor’ countries.

But today Portugal is in recession. For more than two financial quarters, it has seen its GDP fall.

The country’s below-investment-grade debt is not traded on the open market but Portugal relies on funding largely through bond-buying of the European Central Bank. Most recently, fears have grown that the country will need a Greek-like bailout.

But the country’s finance minister was adamant last night that ‘the bond yields do not reflect the country’s fundamentals.'

‘Portugal is under a program and so it does not finance itself,’ Gaspar said. ‘Yield differentials do not reflect the cost of financing.’

The country's structural programme is supported by the ‘trioka' - the European Commission, the ECB and the IMF.

Included is the privatization of state assets such as the airline TAP SA, the finance minister said yesterday.

‘Credibility takes time,’ Gaspar explained, ‘the troika is important as it allows us to prove, on record, that we have not just made agreements but we have also delivered.’

Various austerity measures include the cutting of public holidays from four to two per year. The two being cut are religious holidays.