Portugal’s future will be difficult

By CHRIS GRAEME [email protected]

The Governor of the Bank of Portugal has warned that the next few years will be “difficult” for Portugal.

The front runner for the new Governor of the European Central Bank, Vitor Constâncio, also said over the weekend that he was “surprised” that the Portuguese deficit had reached 9.3 per cent of the nation’s GDP in 2009, which was something “no one expected”.

In an interview with financial news channel Bloomberg, Vitor Constâncio said, that “the next few years will be more difficult than anticipated”.

It was the first time that the financial wizard made a statement about the Portuguese economy since the government delivered its proposal for the State Budget for 2010 last week to the Portuguese Parliament.

The government’s Finance Minister, Fernando Teixeira dos Santos, had revealed that the Portuguese deficit for 2009 had soared to 9.3 per cent of GDP – the highest since the Republic, which celebrates its centenary this year, was founded in 1910 (read ‘Portuguese Republic’s centenary celebrations kick-off’ at, Portugal news).

Earlier in the month, the government has estimated that the state deficit would hover at around 8.3 per cent and promised that the imbalance in the country’s public accounts would be reduced by three per cent by 2013.

Constâncio explained that “in order to obtain a deficit that was less than three per cent by 2013 meant that in 2011 a “very significant effort” would have to be made in terms of reduced public spending.

However, the Governor of the Bank of Portugal did believe that from a “micro-economic point of view” the State Budget for 2010 held “various intelligent solutions given the crisis we have been going through” and gave examples such as financial and fiscal help to Small and Medium Enterprises (SMEs), tax breaks to kick-start research, development and investigation projects, and credit lines to help fight unemployment and help the creation of small companies.

Vitor Constâncio added that unemployment was “an extremely worrying and negative economic situation” for the country but one that had affected all European countries.

“We are in the initial phase of recovery after an enormous recession” he said, adding that unemployment should be “the main concern of European governments”.

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