Portuguese Economy Minister Alvaro Santos Pereira said the fourth review of the country’s aid program has been successful as the government complies with the terms of the international plan to ensure further financing.
“The final part of the review will be taking place in the next few days, but we believe that it has been a fairly successful review,” Santos Pereira, 40, said in a June 1 interview in Lisbon.
The Portuguese Finance Ministry will hold a news conference June 4 about the conclusions of the fourth quarterly review of the country’s financial aid program provided by the European Union and the International Monetary Fund.
Portugal is cutting spending and raising taxes to comply with the terms of the 78 billion-euro ($97 billion) aid plan. Prime Minister Pedro Passos Coelho said March 5 that if the country can’t tap bond markets by September 2013 because of “external reasons,” it would be able to count on continued support from the IMF and the EU.
The Portuguese economy may contract 3.3 percent this year before expanding 0.3 percent in 2013, the European Commission forecast on May 11. The country’s economic growth has averaged less than 1 percent a year for the past decade, placing it among Europe’s weakest performers.
Portugal should “absolutely not” increase public spending to try to improve its economic performance, Santos Pereira said. “It’s not because you spend more that you’re going to get economic growth. It’s if you spend better that you’re going to get economic growth.”
If France or Germany were to increase public spending, that could be good for Portugal, the minister said. French President Francois Hollande took office last month promising more government spending than his predecessor Nicolas Sarkozy.
“If our external markets boost their demand, obviously it’s good for us, we can export more, there’s nothing wrong about that,” said Santos Pereira, who was formerly an economics professor at Simon Fraser University in Vancouver.
Portugal’s trade deficit narrowed in the first quarter as exports rose 11.6 percent and imports fell 3.3 percent.
Santos Pereira said Portugal will be able to stick to its plan even if Greece ends up leaving the euro area.
“We believe that because of our reform program and because of our fiscal consolidation strategy we will be able to hold course,” he said.
The Economy Minister said the European Central Bank is “providing the help it can” to help solve the sovereign debt crisis and doesn’t see so-called euro bonds as an immediate solution.
“Growth has nothing to do with euro bonds, growth has all to do with structural reforms,” Santos Pereira said. “I think euro bonds right now are not on the table.”
To contact the reporters on this story: Henrique Almeida in Lisbon at firstname.lastname@example.org; Joao Lima in Lisbon at email@example.com
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