With Portugal being flagged as the next euro-zone country to follow Greece into a debt crisis, Jose Socrates told parliament his government would take all measures to reduce the budget deficit and contain public debt.
He said discussions with the main opposition party on an austerity strategy had opened a new phase of constructive dialogue.
After meeting his counterpart in Lisbon, Germany’s economy minister called it a bold austerity plan and declared Portugal’s situation incomparable to Greece.
To discuss these questions we have, from Lisbon the economist and former finance minister Eduardo Catroga.
Can Portugal’s situation be compared to Spain and what’s going on in Greece?
Portugal and Spain are different from the Greek situation, which is based on a serious liquidity problem. But there are some common aspects, which have to do with a structural question, related to the foreign debt.
The Portuguese government has reaffirmed its commitment to some ambitious projects, like the high-speed train link between Lisbon and Madrid and the new Lisbon airport. Can the country really afford these projects?
The government, starting with the prime-minister, has a few problems realising that the international financial context has changed since 2008/2009.
The news that the government is sticking to projects which can be lucrative in 20 years time but not in the next five or ten years… I don’t think it’s good news.
The government has to be coherent. It will need to take some measures, such as raising taxes, like VAT, they will ask the Portuguese people to make a sacrifice but, at the same time, they have to reduce the expenses.
We are in a phase that demands an effort from all the main Euro zone politicians to defend the currency stability, but that’s not enough. Governments have to do their homework.