Tuesday

4th Oct 2022

Portugal announces 'clean exit' from EU-IMF bailout

Portugal's Prime Minister Pedro Passos Coelho on Sunday (4 May) announced the country will exit its three-year bailout programme without any further loans, just as Ireland did six months ago.

"The government has decided to exit the assistance programme without turning to any kind of precautionary programme," Coelho said, adding that this was "the right decision" for the country.

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Eurozone finance ministers meeting on Monday in Brussels are expected to endorse the decision, with EU's acting economics commissioner Siim Kallas saying that the commission "will support the Portuguese authorities and people in this sovereign choice".

The other international lender involved in the bailout, the International Monetary Fund, also welcomed the announcement.

"The Portuguese authorities have established a strong track record of policy implementation to address the country's long-standing structural problems. This bodes well as Portugal exits its EU/IMF-supported programme," IMF chief Christine Lagarde said in a statement.

With Portugal's borrowing costs falling sharply this year, Lisbon was encouraged by its European partners to seek a 'clean exit', as further loans would be subject to approval in national parliaments, notably the German Bundestag.

Portugal was forced to seek a €78bn bailout in 2011 and had to adopt harsh austerity measures which triggered mass protests and were partially struck down by the Constitutional Court.

Coelho's cente-right government stood the course, however, and replaced the rejected measures with other budget cuts, such as the closure of public schools and cuts to health care.

After a deep recession, the Portuguese economy is growing again, but slowly and unemployment is still high (15.3%) even if it decreased from a peak of 17.7 percent. Young people are hit hardest, with unemployment among those under 25 years standing at 35 percent.

The country's debt is also a problem - with the bailout having increased the overall indebtedness from 93 percent of GDP to 129 percent.

“Every Portuguese citizen suffered the painful effects of a crisis that could and should have been avoided," Coelho said in his Sunday address.

He said that many families are still struggling, but that the sacrifices were not made in vain, as proven by the "clean" bailout exit.

“We have financial reserves for a year that will protect us from any external turbulence,” he added.

Opinion

Portugal and Greece: the odd return to markets

In the past few weeks, Portugal and Greece have returned to the markets in moves seen in Brussels as heralding a rebound in Southern Europe. But a fragile recovery has barely begun and will take years.

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