'Future of EU depends on recovery in Ireland and Portugal'
A FAILURE by Ireland and Portugal to emerge from the financial crisis would undermine the future of the entire European Union, according to a senior Portuguese politician.
Speaking in Dublin, the country's secretary of state, Carlos Moedas, said the euro was undoubtedly flawed in some aspects, but its fate would be determined by the willingness of individual members states to accept and enforce the obligations of a single currency.
He said these obligations included the need for sound public accounts and reforms to foster competitiveness.
Mr Moedas said no one could deny that Ireland and Portugal had demonstrated they were willing and able to meet their obligations within the euro.
"Mistakes were made, no doubt about that. But both countries are reacting the way they should: refusing to dwell on the past, and instead focusing on correcting early mistakes; on restoring equilibrium and credibility to public accounts; on removing the structural barriers for growth."
Thus, he said, if Portugal and Ireland were successful it would represent a success for the euro.
"And if, despite our efforts and sacrifices, our countries fail to emerge from the crisis in due time, or if the mechanisms of European solidarity which have been in place suddenly fail to materialise . . . then this would not bode well for the future of this great collective project."
For Portugal, reducing the country's current account deficit was crucial to the country's recovery, Mr Moedas said.
"The deficit of our current account was hovering around 10pc of GDP per year. Think about it!" he said. Portugal recorded a current account deficit every year since 1996.
A current account deficit means that the cost of a country's imports exceeds the revenue from its exports that year, so financing must be brought in from elsewhere.
Portugal has cut its annual deficit to below 3pc, exceeding targets set by the IMF.
However, deficits recorded during the 2000s means the country has accumulated a significant amount of foreign debt that still must be repaid.