by CHRIS GRAEME [email protected]
António Saraiva, President of the Portuguese Confederation of Industry (CIP), who signed the new tri-party labour agreement with unions this month, addresses the International Club of Portugal
Portugal will only get out of its financial crisis and win back the confidence of the international markets through a mixture of budgetary consolidation and growth.
Addressing top business leaders at a luncheon organised by the International Club of Portugal this month, CIP president António Saraiva warned that growth needed to be based on exports and external demand for her goods and services.
Praising the cross-party agreement on employment made last week between the Government and social partners, including one key union, the UGT (General Workers Union), he said that although it penalised employees, it was important for growth and company competitiveness.
“For many years budgetary policies were characterised by huge public expenditure and the inefficiencies of the State machine, so that the Portuguese economy became mired by deep imbalances from maladjusted economic policies resulting in serious, accumulated public and private debt,” he said.
It was against this backdrop of great vulnerability that Portugal had to face a serious world economic crisis which in turn led to a loss of confidence by the international financial markets.
This lack of confidence affected and still affects, in a particularly hard way, not only Portugal but the most fragile economies in the Euro zone.
Portugal faced a situation of national emergency, one caused by persistent external and public imbalances coupled with a crisis to do with financing the economy.
“We know that only by making profound economic adjustments will we be able to re-establish macroeconomic balance and restore the confidence of the economic markets,” he said.
Budgetary consolidation was a “prior condition” to restoring confidence. Portugal also had to readjust income expenditure in line with what she was producing so as to stem external indebtedness.
This implied that the Portuguese had to “collectively accept a temporary fall in standards of living” which they were now “feeling the effects of this process close to home”.
“But there can be no budgetary consolidation if the economy goes into a long-lasting recession and if we don’t create perspectives for growth,” warned António Saraiva.
“We won’t be able to sort out our expenditure and income imbalances unless we produce more and better products,” he stressed.
In a nutshell there wouldn’t be external confidence in the economy without perspectives for growth.
“That’s why at a conference last month we reaffirmed the imperative importance of growth – growth that depends on companies, SMEs and large companies too, in all sectors and regions, because it’s those that produce, export and provide employment,” he added.
Growth needed to be sustained, a different type of growth to the one registered during the 1990s. In the 1990s growth was based on internal demand which played second fiddle to growth based on international competition.
That had fuelled internal and external public and private indebtedness. “We converged thanks to cheap credit but diverged in terms of productivity,” he pointed out.
“We lost competitiveness, supporting increases in costs which were way beyond any gains in productivity would allow,” António Saraiva explained.
It was this growth model that drove Portugal at the beginning of this century – a lost decade in terms of convergence – to her recent situation of virtual bankruptcy, something that would have been inevitable if she had not sought external help.
“Now we have to base our growth on external demand, which means upping our competitiveness and productivity whereby the focus of company strategies are based on sectors to do with transactional goods,” he said.
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