PM ‘will do whatever it takes’ to ensure healthy public finances

Portugal’s prime minister on Wednesday told the president of the European Central Bank (ECB), Christine Lagarde, that he would do whatever it takes to ensure that Portugal continues the process of fiscal consolidation and healthy public finances.

In his speech, which had no direct reference to the current Portuguese political crisis, the prime minister warned that governments’ economic, social and budgetary policies “do not operate in isolation and their effectiveness and scope are impacted by the actions of central banks.”

“Measures adopted promptly were essential to – and unlike in the previous financial crisis – ensure financial stability, ensure the necessary provision of liquidity and avoid the fragmentation of markets which, in a context of high uncertainty, would have impeded national responses in many member states.

According to the Prime Minister, “complemented the action of governments or created space for such action, and thus helped that, for example, in the Portuguese case”. António Costa added that the costs of issuing public debt remained “at historic lows, and about half the costs of 2019 (1.1% in 2019; 0.5% in 2020; 0.6% in 2021)”.

“Unlike the previous crisis, companies did not see their access to credit limited, in a particularly critical period of their activity; the interest rates faced by companies remained at historic lows,” he added.

In the European Union, according to António Costa, it was possible to respond to the covid-19 pandemic crisis with “a unique and united response”.

Now, he said, “after the contraction of most economies in 2020, we are witnessing a recovery in all European countries, even above the forecasts made a year ago”.

“In the Portuguese case, employment is already above the pre-pandemic level, and unemployment is at a lower level than before the pandemic. On the other hand, the first half of 2021 recorded the highest level of business investment in Portugal since records began. Just as in the most acute phase of the fight against the pandemic and its economic and social impacts, the national and supranational responses were decisive – including the response of the European System of Central Banks – it is now also important to ensure a policy mix that does not jeopardise economic recovery and that, on the contrary, reinforces and strengthens it”, he warned, before reiterating one of the central messages in his speech:

“It is the right accounts that guarantee Portugal’s international credibility, allowing the country to have saved three billion euros debt interest annually compared to 2015,” he added.