Baluarte
03-16-2013, 12:37 PM
By Peter Wise in Lisbon
Portugal’s centre-right government expects the economy to plunge deeper into recession this year, announcing deeply pessimistic forecasts that will fuel growing anti-austerity sentiment in the country.
The cut in estimates on Friday comes after concluding a tough round of talks with international lenders. The government said the deeper-than-expected downturn in Europe meant the Portuguese economy would shrink by 2.3 per cent this year, more than twice as much as the previous government forecast, as export growth slowed to 0.8 per cent.
Unemployment in Portugal is forecast to soar to 19 per cent by December and not fall below 17 per cent for four years, amid painful austerity measures and a deepening recession in Europe.
“The government has failed at every level,” said the centre-left Socialists, the main opposition party. Other opposition parties described the jobless forecast as “shocking” and called for the resignation of Pedro Passos Coelho, the prime minister.
Vítor Gaspar, finance minister, confirmed that international lenders had agreed to give a second extra year to allow Portugal to meet fiscal targets established as part of a €78bn bailout, partly to help alleviate what he called the “scourge of unemployment”.
The original three-year adjustment programme agreed in May 2011 with the “troika” of international lenders – the European Commission, the International Monetary Fund and the European Central Bank – envisaged the economy would already be growing this year. Instead it faces a third year of contraction.
Unemployment, 16.9 per cent last year, will peak at 19 per cent at the end of 2013, falling only gradually to a forecast 17.5 per cent in 2016, Mr Gaspar said. The forecast implies that youth employment, above 38 per cent, will also rise, constituting what the minister described as a “shock to Portuguese society”.
He said the budget deficit in 2012 had reached 6.6 per cent of national output, above the 5 per cent target, mainly because Eurostat, the EU’s statistical office, would not allow the government to use revenue from the privatisation of Portugal’s airports operator, ANA, to lower the deficit.
Mr Gaspar said that including this figure and allowing for the similar statistical treatment of other transactions, the deficit would have been 4.9 per cent of output.
The minister confirmed that the troika had agreed to give Portugal a second extra year to meet fiscal targets, having already extended the original deadline by a year in September. Lisbon will now have until 2015 to bring its budget deficit below 3 per cent of gross domestic product.
Programme implementation remains broadly on track, against the background of difficult economic conditions. The end-2012 fiscal deficit target was met. The weaker growth prospects require an adjustment of the fiscal deficit path
- joint statement by the EC, IMF and ECB
Portugal has also been given an extra year, until 2015, to make permanent cuts in public spending totalling €4bn. Public debt is now forecast to peak at 124 per cent of GDP in 2014.
Mr Gaspar said the deadline extensions did not mean Lisbon was asking for “more money or more time” in regard to its €78bn bailout, which would end on schedule in June 2014.
It was only because Portugal had showed determination in delivering on its commitments that the troika had agreed to relax the fiscal targets after “difficult and lengthy” talks on the progress of the adjustment programme, he said.
The successful completion of the talks clears the way for Portugal’s lenders to the pay the next €2bn instalment of bailout funds.
A fall in the yield on Portugal’s benchmark 10-year government bonds from about 15 per cent in January 2012 to below 6 per cent was a reflection of international confidence in the government’s efforts, the minister said.
In a joint statement on Friday, the commission, IMF and ECB said: “Programme implementation remains broadly on track, against the background of difficult economic conditions.
The end-2012 fiscal deficit target was met. The weaker growth prospects require an adjustment of the fiscal deficit path.
“Continued strong programme implementation and the envisaged adjustment of the maturities of [rescue] loans to smooth the debt redemption profile will support the government’s return to full market financing during 2013".
Portugal’s centre-right government expects the economy to plunge deeper into recession this year, announcing deeply pessimistic forecasts that will fuel growing anti-austerity sentiment in the country.
The cut in estimates on Friday comes after concluding a tough round of talks with international lenders. The government said the deeper-than-expected downturn in Europe meant the Portuguese economy would shrink by 2.3 per cent this year, more than twice as much as the previous government forecast, as export growth slowed to 0.8 per cent.
Unemployment in Portugal is forecast to soar to 19 per cent by December and not fall below 17 per cent for four years, amid painful austerity measures and a deepening recession in Europe.
“The government has failed at every level,” said the centre-left Socialists, the main opposition party. Other opposition parties described the jobless forecast as “shocking” and called for the resignation of Pedro Passos Coelho, the prime minister.
Vítor Gaspar, finance minister, confirmed that international lenders had agreed to give a second extra year to allow Portugal to meet fiscal targets established as part of a €78bn bailout, partly to help alleviate what he called the “scourge of unemployment”.
The original three-year adjustment programme agreed in May 2011 with the “troika” of international lenders – the European Commission, the International Monetary Fund and the European Central Bank – envisaged the economy would already be growing this year. Instead it faces a third year of contraction.
Unemployment, 16.9 per cent last year, will peak at 19 per cent at the end of 2013, falling only gradually to a forecast 17.5 per cent in 2016, Mr Gaspar said. The forecast implies that youth employment, above 38 per cent, will also rise, constituting what the minister described as a “shock to Portuguese society”.
He said the budget deficit in 2012 had reached 6.6 per cent of national output, above the 5 per cent target, mainly because Eurostat, the EU’s statistical office, would not allow the government to use revenue from the privatisation of Portugal’s airports operator, ANA, to lower the deficit.
Mr Gaspar said that including this figure and allowing for the similar statistical treatment of other transactions, the deficit would have been 4.9 per cent of output.
The minister confirmed that the troika had agreed to give Portugal a second extra year to meet fiscal targets, having already extended the original deadline by a year in September. Lisbon will now have until 2015 to bring its budget deficit below 3 per cent of gross domestic product.
Programme implementation remains broadly on track, against the background of difficult economic conditions. The end-2012 fiscal deficit target was met. The weaker growth prospects require an adjustment of the fiscal deficit path
- joint statement by the EC, IMF and ECB
Portugal has also been given an extra year, until 2015, to make permanent cuts in public spending totalling €4bn. Public debt is now forecast to peak at 124 per cent of GDP in 2014.
Mr Gaspar said the deadline extensions did not mean Lisbon was asking for “more money or more time” in regard to its €78bn bailout, which would end on schedule in June 2014.
It was only because Portugal had showed determination in delivering on its commitments that the troika had agreed to relax the fiscal targets after “difficult and lengthy” talks on the progress of the adjustment programme, he said.
The successful completion of the talks clears the way for Portugal’s lenders to the pay the next €2bn instalment of bailout funds.
A fall in the yield on Portugal’s benchmark 10-year government bonds from about 15 per cent in January 2012 to below 6 per cent was a reflection of international confidence in the government’s efforts, the minister said.
In a joint statement on Friday, the commission, IMF and ECB said: “Programme implementation remains broadly on track, against the background of difficult economic conditions.
The end-2012 fiscal deficit target was met. The weaker growth prospects require an adjustment of the fiscal deficit path.
“Continued strong programme implementation and the envisaged adjustment of the maturities of [rescue] loans to smooth the debt redemption profile will support the government’s return to full market financing during 2013".