Portugal says EU, IMF auditors endorse debt progress
European Union and IMF auditors have positively reviewed Portugal's progress under its May debt rescue package, clearing the way for another aid payment, the government said Wednesday.
“The second quarterly review of the economic and financial assistance programme for Portugal closed successfully today,” Finance Minister Vitor Gaspar said, with 8.0 billion euros ($10.8 billion) now due under the terms of the 78 billion euros bailout.
“In view of the successful review, the payment of the third tranche of the programme, totalling eight billion euros, will be recommended (by the auditors),” Gaspar said.
“Overall, the programme is off to a good start,” the auditors from the EU, International Monetary Fund and European Central Bank said in a statement.
Portugal had to commit to reducing its budget deficit and reform its economy to clinch the bailout deal, and its progress is reviewed quarterly before loan funds are disbursed.
After Greece and Ireland in 2010, Portugal became the third eurozone member state needing a bailout in May when it could no longer raise fresh funds at sustainable rates on the financial markets.
Gaspar said 2012 “will be decisive” to confidence among international partners that Portugal will get through its problems, noting that the economy will be at its weakest next year.
“Economic activity should hit bottom next year, with a total contraction in the 2011-12 period of more than four percent,” he said.
Prime Minister Pedro Passos Coelho, elected in June, has introduced stiff austerity measures to balance the public finances but the cutbacks have helped push the economy into recession, making recovery targets even more difficult.
The country needs to reduce its public deficit from 9.8 percent of gross domestic product in 2010 to 5.9 percent by the end of 2011, but it stood at 8.3 percent earlier this year, putting that objective in doubt.
The centre-right government has submitted a tough 2012 budget that among other measures includes the suspension of 13th and 14th month salary payments for civil servants and pensioners who earn more than 1,000 euros a month.
“The steps set down in the 2012 budget are crucial to put the public finances on a sustainable path and to help create the conditions for a return to growth,” Gaspar said Wednesday.
The auditors endorsed the government’s budget plans.
“The 2012 budget includes bold and welcome measures,” they said, adding that they believe it is line with the target of reducing the public deficit to 4.5 percent of GDP next year.
However the auditors said additional efforts were needed in structural reforms to the economy and warned that the difficult global economic environment would make increasing exports difficult.