Portugal’s economy minister sought to dispel impressions that the country could follow a similar path to Greece in an interview with CNBC, pointing out that the tough economic reforms it is carrying out enjoy the support of the population and stressing that Portugal will not turn its back on the single currency.
Many investors fear Portugal, like Greece, will need to seek a second bailout.
Ten-year bond yields hit record highs in January as the country struggles to balance tough austerity measures demanded in return for its first bailout with a contracting economy.
“The balance between austerity and growth is always a delicate balance and nobody has a magic bullet for this...In spite of all the volatility, we know that we need to stay the course,” Economy Minister Alvaro Santos Pereira said of the reforms the country is implementing.
He stressed that there was broad support for the economic reforms, both in government and among the population.
Greece saw violent protests last weekend when the country’s parliament approved a new austerity bill demanded by its creditors in return for another bailout.
Asked whether the country could convince the markets it is different from Greece, he said: “We have to. And we will.”
“Way before we had to ask for external help, the parties in power now supported reforms. All those reforms have been advocated by myself and my colleagues in the government,” Santos Pereira said. “We are doing these reforms not because they are being dictated to us, but because we believe in them.”
He said there was “a substantial consensus in Portugal” that the only way of overcoming problems in the country is by uniting its people and implementing the reforms the government believes in. “That is exactly what we are doing,” Santos Pereira said.
According to the economy minister, more than 65 percent of people in a recent poll believe that austerity is needed to overcome the country’s short-term challenges.
“So the people believe there is no other option,” he said.
Unemployment is the biggest concern for Portugal, reaching 13.6 percent in December. That compared with a euro zone unemployment rate of 10.4 percent for the same period.
Part of Portuguese reforms are therefore focused on incentives to get the population back to work as well as incentives for companies to hire, Santos Pereira said.
They also include Chapter 11-style rules to allow for swifter restructuring of businesses.
He would like to see a decrease in European Union bureaucracy, with a reduction in complex legislation that is being introduced almost every day which he argues is “asphyxiating companies.”
“We have to re-industrialize Europe. We have to provide a level playing field for our companies that are competing with companies outside Europe,” Santos Pereira said.
But while there is room for improvement, “it doesn’t make sense at all to get out of the euro,” he said.
“With a strong currency, managers and entrepreneurs have to restructure. They have to become more productive. And this is exactly what our exporting companies have done,” he said.
“Why should we get out of the euro? It doesn’t make sense at all. For us, it’s out of the question to get out of the euro.”