by CHRIS GRAEME
Economist Daniel Bessa slammed the State Budget for 2011 as not being sufficient to calm international market jitters. Addressing movers and shakers at a lunch organised by the British-Portuguese Chamber of Commerce in Lisbon on Wednesday, the one-time minister for the Economy, Commerce and Tourism during the PS government led by António Guterres in 1995 and 1996, said that the markets would only trust Portugal’s words when “the deficit was down to zero”.
Painting a bleak picture of Portugal’s current economic situation, he likened the country to a “sick patient lying on a stretcher surrounded by a team of doctors, each one concentrating on his own specific remedy but without a leading consultant taking overall charge of the treatment”.
The Director-General of COTEC Portugal said that the only way to deal with the lack of confidence and mistrust from investors and creditors was to introduce radical and concerted solutions to deal with Portugal’s dreadful balance of payments deficit, external borrowing and swollen, unsustainable public sector deficit.
The freelance company director and consultant said that the State simply couldn’t go on supporting the Government’s current social policies which were bankrupting the country.
He also said that he doubted that Portugal’s small and medium-sized companies (SMEs) could really grow in such a small market in a country of just 10 million people.
Instead he made it clear that the only way for Portuguese companies to survive was to look abroad but warned that finding foreign investment wouldn’t be easy because of the way Portugal’s financial state was viewed by external creditors and investors.
“It’s difficult for a company to grow in Portugal; it has to think global, perhaps in partnerships with other companies. We simply don’t have a lot of large enterprises such as Jerónimo Martins or Sonae,” he said.
Professor Bessa, who hails from Porto, then pointed out that that in the last 10 years Portugal had hardly grown at all – a situation made worse by the fact that the market had shrunk and was in recession. He also warned that Portugal could not go on expecting the European Central Bank to continue buying up Portuguese sovereign debt indefinitely.
The problem was that Portugal’s public and external debt and the percentage of the country’s GDP that it represented was “extremely high”.
This was particularly unsustainable while the country’s growth rate, at around 1%, was so low or even non-existent; therefore public and private debt had to be reduced and the country needed to find other methods of raising capital investment for its companies to grow.
“Portuguese banks can’t continue relying on the ECB. Portugal needs to find other ways of financing, other creditors. You can’t be sustainable while your internal and external debt is more than your annual GDP growth,” he said.
“Our creditors don’t trust us and don’t buy our Government’s story. We’ve reached the limit,” he added.
Professor Bessa said there was only one way to convince the markets that the country meant business and that was by convincing them that the deficit was under control since a country’s debt could not grow more than its annual growth in income.
He also said that Portugal needed to reschedule its debt with its creditors and may even have to seek the help if the International Monetary Fund to put its house in order. “Who is leading the team of doctors to treat the patient? Is it the Prime Minister? Is it the President or is it Parliament. It should be all three acting together as a Troika,” he suggested.