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Productive investment and reduced state dependence vital

By CHRIS GRAEME [email protected]

A former minister of the economy and chairman of the Portuguese Banking Association says that Portugal must create more productive investment if it is to survive.

Addressing the American Club in Lisbon on Thursday, João Salgueiro said that the Portuguese had finally realised that the State could not solve the nation’s problems. The Portuguese people had to do so.

The banker said that the Portuguese had believed that it could substitute the myth of the colonial empire with the myth that somehow by being a good member of the EU and obeying its adherence rules, then all would be well.

“If the current EU sovereign debt crisis has taught us anything, it is that EU club solidarity doesn’t exist.

“We thought that we could dispense with a national strategy, we didn’t have to think about our agricultural and fishing or industrial policies,” he said.

The economist warned that the Portuguese had to reduce their dependence on the State and instead encourage productive investment.

“That’s the only way we will improve the lives of the Portuguese in general,” he said.

If the Portuguese wanted more jobs then they had to be more innovative, productive and competitive.

“It’s the only solution and we have to raise the benchmark and strictly monitor it,” he said, adding that excuses that Portugal was a small and peripheral country simply didn’t wash since other small and peripheral countries had succeeded in Europe and Asia.

Neither was it any good making false comparisons with the problems of Greece, Italy, Ireland or Spain.

“We have a dual problem: a public accounts deficit and a balance of payments deficit. Pointing to others’ problems might avoid the stress but it won’t solve our problems,” he explained.

Instead Portugal had to find a way to get other countries to invest in Portugal and that implied structural reforms to the labour market, the tax system, the judicial system and education.

“This is not as easy as it seems; we’re facing a political, cultural and moral problem and we’ve been talking about reforms since 1978 but haven’t seriously tackled the systemic problems,” he added.

The reasons were that successive parties and governments only cared about winning the next election or gaining another term in office.

He also slammed a lack of government fiscal supervision and holding to account by Portugal’s institutional parliamentary bodies.

“In Portugal, MPs depend on the parties and government to get elected; the parties established who would be voted into Parliament”, creating a system of incestuous party clientism.

“We need greater civic involvement, stricter monitoring of what governments do, if we don’t change the electoral law then there’s no escape,” he warned.

But a change of culture and behaviour wouldn’t happen overnight, but change it would have to sooner or later.

Now what the Portuguese failed to demand of their MPs and the MPs failed to demand of their government was now being introduced by outside agencies like the EU and IMF.

“Now we have some friends who drop by every three months and make sure we’re behaving ourselves,” he said.

The only solution was to be proactive in the next few months, to seriously frontload with substantial and rapid reforms – the 20 essential measures that the IMF and EU had identified as necessary.

“Only then will foreign and Portuguese investors and the markets believe that we are serious,” he added, warning that if these reforms weren’t implemented, Portugal would end up like Greece.

“We have to get rid of the notion that we have colonies, that the Government will resolve everything. Now we have to compete in the world market.

“We are on the threshold of a great economic, social and cultural change, we’re turning the page and I’m more optimistic today than I was a year ago because we are in a big mess and the Portuguese finally understand that,” he said.