World Economy

Portugal: We'll do all we can to avoid a second bailout

Portuguese FinMin: We're working on stability
Portuguese FinMin: We're working on stability

Portugal is committed to doing whatever it takes to avoid requesting a second international bailout, the country's finance minister told CNBC.

Speaking to CNBC over the weekend in Bratislava on the sidelines of a meeting of the euro zone's finance ministers, Mario Centeno said his main focus was to fix the country's economy so that it wouldn't be forced into asking for further assistance from its fellow euro zone countries, the European Central Bank and the International Monetary Fund.

"That's my main job, what we are putting together a commitment on the fiscal front and a reduction in public expenditure in precisely that way," he said.

Portuguese Flag waves in sight of the 25 de Abril Bridge in Lisbon, Portugal.
Dominik Bindl | Getty Images

In 2011, Portugal was rescued by a 78 billion euro ($85 billion) bailout from the European Union and IMF, a process that involved swingeing spending cuts and reforms. The country successfully exited the process in 2014 and, at the time, did not need any further financing.

Nonetheless, concerns remain about Portugal's economic health and its commitment to stimulating its businesses over boosting income levels.

In July, Barclays warned in a note to analysts that Portugal was "struggling with a systemic banking crisis, the lack of a convincing medium-term fiscal plan and excessive public and private sector leverage."

Portugal's budget deficit ran to 4.4 percent of gross domestic product (GDP) in 2015, far above the 2.7 percent target agreed with the European Commission. The Commission opted against fining Portugal — or Spain, which missed its own target — but the country must still aim to get its deficit below a threshold of 3 percent of GDP.

However, Centeno told CNBC that was "only partially true to say we are focusing more on consumption."

"We have a substantial focus on recovering income, especially for families. We are also, of course, directing our policy towards firms, towards investment, we have a very ambitious program that is meant to help firms capitalize, we are doing lots of effort in terms of stabilizing our financial sector which is crucial for investment and economy to grow."

Last month, the Portuguese government secured an agreement with the European Union to pump nearly 5 billion euros into its biggest bank by assets, the state-owned Caixa Geral de Depósitos. Part of the deal was to win private sector financial backing for the bank to the tune of 500 million euros in subordinated debt.

"We put a very ambitious business plan, a very professional team was appointed to the management of CGD, we also changed the incentives which were the three pillars: The business plan, the corporate governance and the incentives," Centeno told CNBC.

"I think the market will perceive this very easily as a very ambitious ‎and market orientated operation so we are confident on raising the 500 million subordinated debt that we have to raise from the market."

Justina Crabtree and Katy Barnato contributed to this report.

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