European Commission Vice President Siim Kallas congratulated Portugal for having been able to exit its three-year €78-billion bailout on Saturday (17 May), but warned that there was no room for complacency, as many challenges are still facing the country.
Three years ago, Portugal embarked on a major economic adjustment with the support of its partners in the European Union and the International Monetary Fund.
Portugal’s economy suffered its worst downturn since the 1970s under its bailout. But economic activity turned positive again last year.
On 4 May, the centre-right government of Prime Minister Pedro Passos Coelho announced it will no longer have to answer to foreign creditors after the bailout ends on 17 May [read more].
“Thanks to the determined efforts of the Portuguese authorities and the resilience and courage of the Portuguese people, major progress has been made in addressing the economic imbalances that have been weighing the country down for many years”, stated Kallas, who replaces the Vice President Olli Rehn, responsible for economic and monetary affairs, who is on campaign in his native Finland.
According to Kallas, decisive action has been taken by the Portuguese government to put public finances back on a sustainable trajectory. The financial sector has been stabilised and strengthened, structural reforms in many sectors of the economy have begun to lift Portugal’s competitiveness and remove obstacles to investment and job creation, he said.
But Kallas warned that the efforts to keep budgetary discipline should continue.
“While this is a cause for celebration, there is no cause for complacency. To deliver a more robust recovery and bring down the still unacceptably high level of unemployment, it will be essential to maintain an unwavering commitment to sound budgetary policies and growth-enhancing reforms in the months and years ahead”, he said.
The fact remains that Portugal still has its troubles. The economy shrank 1.4 percent last year, the most in the euro region aside from Greece and Cyprus, the European Commission said this month. The jobless rate is at 15.1%. The government forecasts the economy will now grow 1.2% in 2014 and 1.5% in 2015.
After Greece and Ireland received EU-IMF bailouts to cope with their swollen public debts and deficits, Portugal was the next eurozone country which needed to be rescued despite efforts to put its public finances in order.
The Iberian country’s €214 billion of debt is the third highest in the euro region as a percentage of gross domestic product.
Portugal signed up to a "tough but fair" €78 billion international bailout in May 2011, which has driven the country into recession for two years.
- Commission: Statement by Vice President Kallas on Portugal