LISBON — Portugal is wrongly following a policy of “austerity at any price” and will need at least an extra year to reduce its budget deficit to the target established under a 78 billion euro ($98.1 billion) bailout, the leader of the opposition Socialists said.
Antonio Jose Seguro warned that Europe must urgently find ways to help the weakest economies in the euro zone, but said Portugal would stay in the euro even if Greece exits the common currency. “All the information I have shows me that Portugal has every condition (in place) to remain in the euro zone, even if Greece leaves,” Seguro said in an interview.
He said Portugal should be given one more year to meet the budget goals agreed under the terms of its bailout, beyond 2013 when the country is envisaged returning to financing itself via the bond markets. Portugal is currently the second most risky country in the euro zone after Greece, in terms of bond spreads comparing the yield of its government debt with that of Germany.
“I am defending (the idea that) Portugal needs at least one more year to carry out a healthy and intelligent consolidation of its public accounts,” said Seguro. “It is evident that the Portuguese cannot take any more measures, neither families nor companies.”
Seguro said he did not believe Portugal would need more bailout funds, as suggested by many economists.
He said his party stands by the terms of the bailout, but austerity must be softened to prevent the country’s “recessionary spiral” from worsening, and to achieve that, budget goals should be extended.
Under its bailout, Portugal has to post a budget deficit of 4.5 per cent of gross domestic product this year, compared with 4.2 per cent last year. Next year it must be cut to 3 per cent.
Officials from the European Commission, the European Central Bank and the IMF — known as the “troika” — are in Portugal for a quarterly review of the economy. They will meet Seguro later.
The ruling centre-right Social Democrats have ruled out any extension of bailout goals or more money.
Seguro took over as leader of the centre-left Socialists last summer after the government of his predecessor, Jose Socrates, collapsed following its decision to seek a bailout.
The Socialists have around 25 per cent support in recent opinion polls.
“This recipe of austerity at any price is not resolving anything,” said Seguro, adding that the election of Francois Hollande in France had changed the terms of the debate on how to resolve the euro zone crisis.
“If I was prime minister, I would also have to adopt austerity measures, but not in the strength and pace they are being applied in Portugal. The policy has to change, giving priority to employment and growth and reconciling this with budget discipline.”
To do this, he said Europe needs to quickly adopt measures to help its most fragile economies, through issuing common euro zone bonds and changing the statutes of the European Central Bank to boost its direct lending to troubled countries. — Reuters