Portugal ‘on track’ to redress fiscal crisis: EU

Portugal is “on track” to redress its dire fiscal situation and regain the confidence of the markets, EU commissioner Olli Rehn said Wednesday.

Portugal passed a review by the European Union, European Central Bank and IMF last month, although the auditors said challenges remained.

The so-called EU-ECB-IMF “troika” approved the payment of a slab of aid worth 14.9 billion euros, of which 9.7 billion euros were to come from the EU and about 5.2 billion from the IMF.

Portugal was the third eurozone country to be bailed out, receiving last year a package worth up to 78 billion euros ($102 billion) after Greece and Ireland, in return for a commitment to reform its economy and impose an austerity programme.

The programme “should continue to reinforce confidence … in order to achieve a 3% deficit next year,” Rehn told joint press conference with Finance Minister Vitor Gaspar following talks in Lisbon with Prime Minister Pedro Passos Coelho.

“The Portuguese situation is very different from the Greek situation,” he added, as there was “a strong political consensus from the start” for reforms.

“Portugal is on track” … and “We trust it will remain on track,” he added. “Portugal should focus on the implementation of the programme. I trust it will deliver results.”

On a two-day visit, Rehn will meet President Anibal Cavaco Silva and members of parliament on Thursday.

Carlos Moedas, the Portuguese official in charge of coordinating with international creditors, said Tuesday the country was “moving more rapidly than expected in completing (its) objectives”.

In addition to cutting its deficit by slashing spending and raising taxes, it has to undertake reforms to free up the labour market by making it easier to fire workers, make working hours more flexible and reduce regulation.

The reforms will allow “creating jobs and to have a different country in the years to come,” Moedas said on the eve of Rehn’s visit.

Portugal’s economy shrank by 1.6 percent in 2011 and the EU, ECB and IMF are concerned that a contraction of more than 3.0 percent this year could complicate its efforts to reduce its cut its deficit.