Portugal PM vows sacrifices will pay off as bailout ends
AS Portugal today becomes the second eurozone country to leave a bailout, its Prime Minister promised the sacrifices made to date would not be spoiled.
The southern European country follows us in leaving its €78bn troika programme without the cushion of a so-called precautionary credit line to help ease the transition to full market access.
Much has been done over the last three years, and investors have placed their faith that the economy is on the mend after years of harsh austerity and reform measures.
Ten-year borrowing costs may be about twice those of France, but at about 3.7pc as of yesterday, they've come along way since the peak of 17.4pc reached at the end of January 2012.
With the country's budget deficit at 9.8pc of gross domestic product in 2010, the country ended up seeking money a year later as investors turned against European debt after Greece revealed an unexpectedly big hole in its finances.
Portugal, which had last received external help from the International Monetary Fund in 1983, had been trying to avoid requesting aid again.
Since 2010, budget spending has been reduced by about €12bn. The economy is now about 4pc smaller. Taxes were raised, pensions and salaries cut, and a suite of reforms were imposed.
In an interview with the Irish Independent last month, the country's Europe Minister Bruno Macaes said the Portuguese people understood what needed to be done.
"The Portuguese people have been able to combine a solid realism about the difficulties and the challenges, and the understanding that this process is going to take a long time, but at the same time being hopeful for a better future," he told this newspaper.
Prime Minister Pedro Passos Coelho accepted this week that the path of austerity had not been an easy one.
"Don't forget these three years were very, very tough. No one wants to spoil the sacrifices we have made," Mr Coelho said.
"No one wants to go back to an unsustainable path in the Portuguese economy."
Despite the progress, much remains to be done, and a shock 0.7pc decline in GDP in the first quarter of the year points to the fragile nature of the recovery.
The troika has warned that while the country is reaching its deficit targets, making the economy more dynamic, flexible and resilient remains an ongoing challenge.
And they issued a stark warning not to deviate from the current path.
"With the programme ending, it will be essential that Portugal commits to sound economic policies for the medium term. The currently favourable economic and financial conditions should not lead to complacency.
"Building on the social consensus and resilience demonstrated by the Portuguese people during the programme, it would be appropriate that all actors in the society agree on the broad contours of a strategy to strengthen the economy's prospects for self-sustaining growth and prosperity."
Unemployment remains staggeringly high at over 15pc and debt levels are the third highest in the eurozone.
As Portugal retakes control of its finances, the Government can take solace from the significant improvements which have been made, and the country has been rewarded by the markets. But, while the good news should be enjoyed, challenges remain.