By CHRIS GRAEME [email protected]
The economist and ex-minister of finance who accompanied and advised the ‘Troika’ on Portugal’s austerity measures says that only through radical structural reforms and changes in the country’s economic model can it begin to enjoy growth.
Controversial financial wizard Eduardo Catroga was addressing around 500 business leaders at a dinner organised by the French-Portuguese Chamber of Commerce (FPCC) recently in Lisbon in which several Portuguese companies were recognised as successful models of competitiveness and productivity in France.
The economist said that the FPCC was a “prestigious institution” with 124 years of history, founded in 1887, during a “difficult economic period for many countries in Europe in the second half of the 19th century”.
At that time, some countries had defaulted on their financial obligations, including France and Portugal, and which heralded in a difficult period in European economic history. He was confident that pattern would not be repeated in the current Europe-wide economic crisis.
Catroga remarked that for eight decades the Chamber had made a “valuable contribution to cement and strengthen ties between the two countries”.
“France has represented a strategic partner for Portugal for 120 years, economically, politically, socially and culturally, and continues to be a great partner,” he said.
From an economic point of view France is Portugal’s third most important market in Europe, while Portugal is France’s 17th most important trading partner.
Trade relations between the two countries had developed well thanks to the dynamic qualities of many companies – 3,000 Portuguese companies export to France.
But Portugal currently needs to increase its exports, not only to traditional markets like France, but ato take advantage of new markets with growth potential.
“Portugal is suffering a serious macroeconomic readjustment, a period when the country needs to correct excesses in public, private and internal expenditure, which had accumulated mainly over the past 15 years, and particularly in the past 10 years, which has resulted in a level of public and private indebtedness which is damaging and unsustainable,” he said.
The financial crisis is not just a Portuguese problem, but rather one in many countries. It has become a problem of contagion, first in Greece, then in Portugal with the risk of it spreading further without decisive political action.
Finding solutions at a European level with regards to the Euro is vital. “We have 17 democracies suffering from a slow decision-making process which is not compatible with the speed and nervousness of the markets,” the economist said.
Portugal needs “fair European winds” but also needs “to do its homework” which the Government has committed to doing. “We have to correct our high level of public expenditure, yet we cannot kick-start the economy by public spending because that would only make our public debt even worse,” he warned.
“A few months ago we were on the brink of not having the money to fulfil our commitments, therefore the current programme of financial sanitation has a macroeconomic component, which means a tough, but necessary adjustment, and also has a structural reform component which is vital to re-launch economic growth,” said Catroga.
The big problem is that these reforms take time to bring positive results and the markets are very impatient and want results in the next quarter, while the austerity measures can slow down the chances for economic recovery.
Here too companies have an important role to play. A change in development models by emphasising private and company investment, especially in the transactional goods and services sector is vital, by exporting goods and avoiding too many imports.
But there are Portuguese companies, small and medium sized enterprises, that are productive and competitive, with successful competitive strategies for internationalisation, and it is here Portugal needs to invest – in companies doing business abroad.