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Portugal: are budget cuts enough?

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Portugal: are budget cuts enough?

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Portugal has taken a big step towards resolving its economic woes, after approving an austerity budget for 2011. But will this budget be enough to avoid resorting to outside help, as has happened in Greece and more recently in Ireland?

To help understand the different scenarios that Portugal could face, euronews spoke to

Maria João Rodrigues in Lisbon. A former employment minister, economist and university professor, she is also a special government advisor for European policy.

Tiago Marques, euronews:

“Maria João Rodrigues, is the 2011 budget ambitious enough to get Portugal out of this unprecedented crisis?”

Maria João Rodrigues:

“This budget, approved today, represents, in fact, a very significant effort by Portugal to rebalance its

books. It was approved with a clear majority in parliament. And I think that it is a very important step. But it is not enough. Now the country has to take action to launch a plan for growth, job creation, and raise its level of competitiveness which is the principal problem that the country must resolve.”

euronews:

“You are telling me that this austerity budget won’t be enough to give confidence back to the markets?”

Maria João Rodrigues:

“I have to say that market confidence has recently been more unsettled by other factors. Doubts over the ability of the weakest countries to respect their commitments on deficit reduction, after 2013, have not only unsettled those countries, but the whole of the euro zone.”

euronews:

“Although Portugal is in a different situation to Greece or Ireland, isn’t the government compelled to ask for outside help to weather the storm?”

Maria João Rodrigues:

“In principle, Portugal won’t need this outside help. We have to remember that Portugal had a relatively balanced budget before the start of this economic crisis in 2008. The Portuguese problem is different: this is not a problem with the banking system, which is very sturdy, or public services, which continue to be reformed. The Portuguese problem is fundamentally one of competitiveness and to remedy it, a big national effort is required but also a certain sense of calm and control when confronted with pressure from the markets, which, in fact, helps no-one.”

euronews:

“The Portuguese Economy Minister has deplored the European Union’s lack of ability to respond to the difficulties that Europe is going through. What sort of response can the EU bring?”

Maria João Rodrigues:

“It is fundamental that the EU sends out a clear and joint message. This message should say: we, the members of the euro zone, have budgetry responsibility, what is more we are going to reinforce it. We can count on the solidarity of member states because we are also a political union and we are going to cooperate more closely to reinforce growth and job creation. This message, if it is given strongly, and by all those on the European stage, can have a calming effect on the financial markets.”

euronews:

“Maria Jaao Rodrigues, economist and special advisor on European policy, thank you very much.”