Governor of the Bank of Portugal says country is in recessio

The new Governor of the Bank of Portugal, Carlos Costa, confirmed that Portugal was officially “in recession”.

Speaking to business daily Diário Económico on Monday, the former Vice-President of the European Investment Bank said that Portugal’s only salvation lay with exports.

On Friday Carlos Costa addressed Porto businessmen and bankers at a luncheon of the British-Portuguese Chamber of Commerce, which was closed to reporters.

But in his interview on Monday he warned that there was a “limit to using exporting companies” to save the economy.

The comments couldn’t have come at a worse time, with the Portuguese government and political system in turmoil over a controversial no-confidence vote over bitterly hard austerity measures.

Not only that, but interest rates on Portuguese sovereign bonds soared to a record 7.5% on Tuesday evening – the day before the Government needed to raise between €750 million and €1 billion in cash on the international markets.

Carlos Costa said that all the macro-economic economic indicators showed there would be a recession in 2011.

On Tuesday, both the Minister of Finance, Fernando Teixeira dos Santos and President Cavaco Silva discussed the looming economic emergency at a meeting of finance ministers (ECOFIN) in Brussels.