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ESM chief Regling says concerned about Portugal

The head of the European Union’s rescue fund, the European Stability Mechanism, voiced concerns on Friday about the state of Portugal’s public finances.

“The only country I am worried about is Portugal, independently of Brexit,” ESM chief Klaus Regling told the weekly WirtschaftsWoche.

“The government there is rolling back the reforms… Portugal is becoming less competitive again as a result of this,” Regling said.

“The lack of competitiveness was one important reason for the crisis in Portugal,” he continued.

But now, Lisbon had raised the minimum wage and salaries in the public sector again and shortened working hours.

There could also be new budgetary risks if the government solved the problems in the banking sector with state aid.

“We have to pay a lot of attention to what happens,” Regling warned.

German finance minister Wolfgang Schaeuble had warned Portugal earlier this week that it would “be committing a grave error if it does not respect its commitments and would need to request further aid.”

But Schaeuble’s remarks were not well received in Lisbon, where his Portuguese counterpart curtly replied that “no new plans for financial aid is being looked at.”

Portugal failed to bring down its deficit to less than 3.0 percent of output in 2015, as required by European rules, as a result of the costs of bailing out the bank Banif in December.