Finance minister promises a 127.7% debt to GDP in the end of the year

Finance minister Mário Centeno stated this Sunday that public debt will fall to 127.7% of GDP by the end of the year. In an interview to the Portuguese TV channel RTP, the head of Portuguese Finance emphasized “this is a certainty”: “it will be the largest decrease in the Portuguese public debt of the last 19 years. Public debt will fall in the next couple of years, consecutively, until it stabilizes”, the minister stated.

In fact, Mário Centeno does not seem to be worried about the records of the Portuguese public debt, which stands at 130.4%, close to 250 billion euros. The minister explained that, in order to deal with the early payment to creditors in October, “the country had to go to the market and become a little more indebted”, justifies the minister. The strategy will “result in a very strong reduction” of the debt, “very significant in terms of GDP percentage”.

This interview was made two days after S&P upgraded the Portuguese debt to BBB-, a decision that will make it easier for Portugal to access the bond market. “This decision is absolutely crucial in what the Government has been doing over the past two years”, stated Mário Centeno. When asked about the impact the removal of the “junk” status would have on Portuguese families, the minister underlined: “The financing costs comprehend all agents, such as the State or the financial sector, and also companies and families, which are the ones benefiting from the additional financing capacity“. Centeno also considered it was “expected” that this decision will further accelerate a similar behavior from other rating agencies who still grade the Republic negatively, namely Fitch and Moody’s. “Our perspective, now more solid, is that the remaining rating agencies will follow S&P’s example”.

In the interview, Mário Centeno was confronted with the possibility of becoming the next Eurogroup President. On the issue, he left all options open. In fact, he considered that it is “necessarily compatible” with his position as the Portuguese Finance minister in Portugal, since the job must be occupied by someone in that position in any EU member country. “I have been saying that this is a national goal. More important than the Eurogroup presidency, it is important that the Portuguese presence and ideals for Europe are discussed in all forums in the Euro area and European Union”, he concluded.