At the start of a new year, the Portuguese manager acknowledges that uncertainty reigns and that, “in geopolitical terms, the world is more complicated” than he has ever seen it.
At 61, António Horta Osório looks at the world through the eyes of someone who has travelled extensively. He is currently a non-executive director at several organisations and a senior advisor to private equity firm Cerberus, particularly in the financial area. Recognising that the world is dangerous, he sees the German chancellor as a figure who can help Europe, and considers support for Ukraine to be crucial.
For Portugal, he admits that the country has grown above the European average and reduced its public debt, but stresses the urgency of more pro-growth policies, the only way to improve the income of the Portuguese people.
António Horta Osório is someone who has projected a certain optimism throughout his life. How do you see the coming year, this cycle?
I don’t consider myself an optimistic person, to be honest. I consider myself a realistic person, in the sense that I try to do my best in relation to the situation at hand. There’s a saying I really like, which is to be prepared for the worst, but hope for the best. And, as Nehru [India’s first Prime Minister, between 1947 and 1964] said, the hand of cards each person is dealt is random, what a person does with it depends on their skill. So, I usually like to think about the risks ahead, the possibilities we have, and try to outline a plan to do the best we can, given our capabilities as a team and our environment. In that respect, it’s not a question of optimism, but of trying to do the best with the cards we have in our hand and the environment. I think it is always possible to do better, and one should always be prepared to have a mindset of trying to do better.
Taking that reasoning, how are we starting the year?
I think we have started the year on a very difficult note. In geopolitical terms, the world is perhaps in the most complicated state I have ever seen it, as far back as I can remember. Starting with the war in Ukraine, where peace is highly uncertain. And I think Europe is underestimating, at least publicly, the danger this poses to European borders. We have a very unstable situation in the Middle East. We have a situation in Taiwan where, in my opinion, everything that is happening in the other conflicts and with the attitude of the United States should only give China confidence that unification could be achieved perhaps sooner than they would expect. And I see growing pockets of instability, such as recently in Venezuela. The world, in geopolitical terms, is very complicated.
The attitude of the United States, in my opinion, does nothing to help the world order and, in this context, I am surprised that the financial markets are quite, I would say, complacent.
Looking at the Portuguese economy, we have a consensus, more or less, of growth around 2%. How do you see our prospects?
It seems to me that the situation in Portugal is very positive when compared to the European average. For the first time in 50 years of democracy, we have had balanced public accounts for the last three years, even with a budget surplus, which, I repeat, I have said this a few times, is not necessary to have balanced public accounts, but we have it. Therefore, the balance of public accounts is to be commended, and we must not forget that this balance is due to the courage of Pedro Passos Coelho’s government and the governments that followed, and to the sacrifices made by the Portuguese people, which they have not forgotten.
Therefore, this must be maintained. But given that we have this situation, which is unique in Europe, as we are one of only three countries in Europe with a budget surplus, we should turn our attention more to the pending signature of the Portuguese economy, which is the improvement of Portuguese wages and, therefore, the quality of life of the Portuguese people, given that we have balanced accounts.
Our wages are a third lower than in Spain, half those in Europe, a third of those in Ireland, and we see Eastern European countries such as Hungary, the Czech Republic and Poland, which joined the European Union after us, rapidly overtaking us in terms of per capita income. I am only giving these examples to show that it is possible to do better. We are growing at 2-2.5%, slightly below what was expected last year, but it is better than Europe, which is positive. The government has a reformist mindset and ambitious growth targets. However, it has weak parliamentary support, which makes it difficult to implement these measures, but I think that Portuguese society as a whole should demand more from its politicians and should have a mindset of ‘why can’t we grow at 4 or 5% per year?’. Because only by growing at that level can we achieve a significant improvement in the quality of life of the Portuguese people within 5 to 10 years, and you only have to look, for example, at Ireland within Europe, or Poland, or the Czech Republic, to see that this is possible.
Are the social tensions we have seen, which are even reflected in parliamentary representation, related to this dissatisfaction among the Portuguese people, who are at a point where they are clearly demanding more?
I think it has partly to do with that, and partly with the immigration policy that was followed, which was not a smart policy and which has generated these side effects that we are now seeing. We are a small population, we have roughly the same area as the Netherlands, with half the population. We have the same population as Belgium, which is almost twice our size in terms of geographical area. We could clearly have a larger population. A larger population leads to greater wealth, but this, as I have said many times, should be done taking into account the capabilities we need to grow more and better, and having a policy of welcoming people who can integrate well into Portuguese society. Therefore, it has to be done judiciously, as New Zealand does, as Singapore does, as Canada and Australia do, and we have basically given up on having a policy, and this is causing significant social problems. This leads to discontent, leads certain political parties to try to take advantage of it, and this is not positive for Portuguese society or for its cohesion.
We are in the midst of implementing the PRR projects. If we look at our economic growth levels, not only in Portugal but also in Europe, shouldn’t we have already seen a more visible boost in terms of growth?
I don’t share that opinion. I think this bazooka served to limit the impact of what had to be done in Covid to maintain productive activity and employment, and it was very well done. Europe’s fundamental problem is one of attitude and culture among Europeans. Most Europeans want to earn more but work less. That is very difficult, unless productivity increases significantly. Americans, on the other hand, work harder than Europeans and are more productive. If we look at the last 10 or 20 years, we see that American and European per capita output has diverged significantly. I am not saying that this is right or wrong. These are lifestyle choices between leisure, family, hobbies and work. It is a matter of choice. But in relation to the question, it is obvious that there are only two ways to achieve better living standards. Either you work more, or you work better, or both. And Europeans do not want to do that. Just look at the French example. The Portuguese retire at 67 and the French have thrown the country into turmoil because there was an attempt to raise the retirement age to 64, which is unlikely to happen and is in the process of being suspended. This is a question of attitude, but it is important for people to realise that when this happens, someone has to foot the bill to maintain the welfare state. Because there is a lot of talk about measures, but measures must always be viewed in terms of their financing or their alternative.
Let’s suspend the reform in France, very well. So, to suspend the reform in France, what is being done on the other side to keep the accounts balanced? That is not the discussion we are having. This is just to give the French example, which could be given in the Portuguese example. There are lots of politicians who say we are going to waste money on this, that and the other. They should always say, ‘I propose doing this and I will finance it like this.’ Because the basic assumption is that the accounts must remain balanced, as in any family and as in any company. You have to live within your means, don’t you?
Returning to the PRR and the bazooka, one of the arguments I have seen is that it should not be measured by its immediate impact, but that it is sowing seeds that may bring more structural growth in the future. Do you think this will really make a difference to our future growth?
Ideologically, I am not in favour of the state or supranational entities determining the growth of nations. I think it should be private initiative, which knows best in each specific case how to apply resources, that should promote growth, and I think the state should free up resources for private initiative to do what it wants with them.
The state should limit itself to essential functions or those with externalities, in the sense that there are implications beyond the measures themselves to ensure an adequate welfare state, but it should limit its weight in order to free up resources for the private sector. These are the models in the world that have yielded the best economic results.
Therefore, in this respect, I see the bazooka and these measures as necessary in certain contexts, but not decisive. Now, of course, this raises the fact that Europe does not have an integrated capital market. It was essential to have an integrated capital market to give depth to liquidity and the movement of resources in Europe as opposed to and in competition with the dollar and the American market. The bazooka led to the issuance of Eurobonds for the first time, which I think is very positive. I think this should be repeated, not only because of the depth it gives to the European capital market, but also because it is another step in the construction of the European market and because, in my opinion, it leads to lower costs on average than the arithmetic sum of each country’s financing costs.
I think this would be very important, combined with the unification of the European single market in the banking sector. Banks continue to operate in a fragmented space and are therefore, by definition, more inefficient. So, this aspect seems positive to me, but ideologically, what needs to be done is to put more money in the pockets of the Portuguese people, and they should do with that money what they think is best. Measures should be more focused on lowering taxes for companies, because it is companies that create wealth, and if they create wealth and are more productive, they can increase the wages of the Portuguese people, rather than merely redistributive measures. We have done a lot of that lately, and it has been fair, but the measures that create wealth are those aimed at increasing the productivity of companies, which are the part of society that creates wealth.
Families and the state consume the wealth that companies create.
Speaking of competitiveness. The government, with regard to companies, has given consistent, albeit timid, signs of tax relief, and there is still something that remains to be done, but which holds some promise, which is the reform of the state. Between these two factors, taxation and State reform, which could have a greater impact in terms of bringing more competitiveness to companies and the economy?
I think both are important. The reduction in corporate income tax, especially for small and medium-sized enterprises, which is being implemented gradually, is very positive. And I think that reforming the state to facilitate the implementation of projects, the creation of companies, authorisations, licences, the time taken by the justice system, etc., improving all of this increases productivity. You only have to look at what is happening with our justice system to get an idea of what this means in terms of reduced productivity. I think both are important.
And I still say that I think the Government has this desire for reform. But, obviously, with minority support in the Assembly of the Republic, it is more difficult than if it had majority support. In this context, the election for the Presidency of the Republic will also be very important.
Are we doomed to have our young people emigrate for economic reasons or because of a lack of interesting job opportunities in Portugal? It has been one of the big problems and many families live with this.
It has been, but I think this issue should be viewed, like all coins, from both sides. We have a great situation, we have a great opportunity for our young people, who can emigrate within the single European space. They don’t need authorisation to work in other countries, which wasn’t the case when I was young. Therefore, Portuguese people, who speak English beautifully, can work in the single European market without restrictions. Probably many of them don’t think this is normal, just look at what has happened now with the United Kingdom, where this is no longer the case. It is a huge opportunity for Portuguese people to compete in the single European labour market and go where the best opportunities are, improving their standard of living. Obviously, this involves sacrifices in terms of geographical relocation, moving away from family, etc. It has its problems. It would be better if we had those opportunities here too. That is why I think it is very important that we gradually increase productivity in order to increase wages, especially for young people. But I think we should recognise that, thanks to Europe, Portuguese people can work anywhere in Europe without needing a work permit, and therefore compete in the labour market within Europe. And with much better wages in other countries.
In January, we concluded a very intense election cycle with the presidential elections. Will there be conditions for some calm from now on?
I think the situation is unstable. Depending on the outcome of the presidential elections, we will have a more stable or more unstable government, depending on who the next President of the Republic is. A minority parliamentary support government is always, by definition, unstable. Therefore, I think that this type of event must be carefully considered and, therefore, no, I do not see it improving in the short term.
When you talk about the importance of the President, are you referring to a President who, due to their profile, can bring more stability to a government? Is it important to have a President whose main mission is to ensure governmental stability, rather than someone who is perhaps more impulsive?
No, I’m not saying that. And, obviously, the Portuguese people will judge what they think is best in each case. What I think is that this is one of the factors that should be considered. It is not the only one and, obviously, we do not want governmental stability if we have a bad government.
It is important for the Portuguese people to consider that one of the fundamental aspects of the next President of the Republic, given that we have a minority government in the Assembly of the Republic, is what each candidate can bring in terms of governmental stability and, obviously, what the character of each candidate is. Because, I repeat, we obviously want governmental stability if the governments are good, and we want presidents who constructively challenge governments if they take measures that are not good.
In recent years, we have had Brexit, a pandemic, wars, Donald Trump, especially in his second term, and trade wars. Is this the new normal, or will we ever return to an order in which we more or less know that we are cruising along at a steady speed?
In my opinion, the political situation and world order have indeed been deteriorating. In the case of the UK, I remember perfectly well that when I arrived there in 2006, Tony Blair was Prime Minister, and since then it has been in decline, culminating in Brexit, which, in my opinion, as I said several times at the time, was a huge mistake, not just for the UK, but for its future, as is now becoming clear. Ten years have passed, the famous ‘Singapore on Thames’ never appeared, and the United Kingdom has clearly declined in relation to Europe, with the British people being quite dissatisfied with their governments. In my opinion, England opted for isolationism instead of trying to change Europe from within, which was the project it should have undertaken. The United Kingdom was very credible and very influential in the institutions of the European Union and chose to leave instead of trying to change it from within, thus maintaining its weight in one of the three major world blocs. This has left the United Kingdom now, let’s say, facing the reality of the true decline of the British Empire, with Europe, China and the United States as the three major blocs. And the United Kingdom is a much smaller bloc in this respect.
It has literally closed itself off on the island.
As the English used to say, ‘fog in the channel, Europe is isolated,’ right? It’s a shame. Being British myself and a staunch Europeanist, I deeply regret that the United Kingdom has taken this decision. In terms of mercantilist policies and the recent world order, I hope it is a temporary issue. We are at a time when several world leaders are opting, shall we say, for materialistic issues over issues of national values and mission, particularly in the United States. I sincerely hope this is temporary, because I don’t see anything good coming from it in the long term.
So, perhaps we will not return to “normal normal”, but we will not always live in such abnormality as we do now. It will be something in between…
It is important for people to realise that this depends on us. In each country, it depends on the population, on who they vote for, on who they choose to be their leaders, and therefore this is not something to be taken lightly. It is a shame that the quality of leaders is declining, that there are fewer and fewer good leaders, but this is also linked, in my opinion, to the way leaders are appreciated, how they are remunerated, how they are incentivised. Nowadays, people who go into politics rarely have anyone to thank them for it; they are even insulted. Remuneration is very different from other professions, so the incentives to go into politics today, compared to, for example, when we had the 25 April revolution, are very different. And, obviously, because they are very different, it is more difficult to produce good leaders. We have some, but we undoubtedly have fewer than we had 50 years ago. This is a very serious problem that is not being discussed.
Is it this lack of incentive or the wrong incentives that has meant that it has never crossed your mind to take on a political mission?
Not necessarily. I have always believed and said that everyone needs to know themselves well, know their strengths and areas for development. And I have always thought that my characteristics were more suited to working in companies, in the private sector, managing teams, leading teams, motivating people and developing projects. That is my natural vocation, whereas politics is more the art of compromise. In that respect, I am less inclined to compromise.
Returning to Europe, we had two documents, the Letta report and the Draghi report, which should have given us a wake-up call. From what you have seen since that debate, are we really changing our lives or are we just pretending to change our lives?
The European project is a difficult undertaking in that people have to remember that it was created for political reasons, to prevent another war in Europe, and we will see if it achieves that goal. It is more than an economic project; it is a project for political harmony based on solidarity between states and the creation of a single European market. This project had to be built carefully and with the consensus of its Member States. As Europe enlarges, it is obviously more difficult to reach consensus among 27 Member States. In my opinion, these two studies — and I have immense respect, for example, for Mario Draghi — are profound and correct, but Europe is at a point where there is no need for much more debate. Europe is at a point where action is needed. And to take action, we need leaders who are capable of taking measures that may be somewhat unpopular, that people may not fully understand, but that will lead to the goals that Europe needs.
We have the United Kingdom outside Europe; Italy, which has surprised us positively but has had little influence so far; France, which is clearly in a very difficult situation, economically, politically and socially; and Spain, which is performing well economically but also has a very complicated political situation. Europe’s great hope at the moment is Germany with Chancellor Merz, who seems to be a person of character and with clear ideas, but who again has a weak coalition in government. But Germany, not only because of what I have just said, but because it is the largest country in Europe and the largest European economy, is, in my opinion, Europe’s great hope at the moment.
For this project to move forward, returning to consensus and returning to the 27 countries, in my opinion, there has to be a multi-speed Europe. There has to be a core, which must necessarily include Germany and France, probably the Netherlands and the Nordic countries, where speed increases at the expense of less consensus. But to maintain the harmony and integrity of the European space, there must be a second or third level where countries choose whether they want to go faster with less consensus or slower with more consensus. And there must be transparency and permeability between the various levels. Therefore, I think Europe needs to take action. And to take action, it must have capable leaders and a core group of European countries, which, I repeat, must necessarily include Germany and France, who decide on this project and motivate and inspire Europeans to move in this direction. And the other countries cannot be excluded in any way. They will have to remain at a second or third level, where they choose between speed and unanimity.
In fact, we already have something similar, with Hungary in the European Union, but it spends its time wanting to do exactly the opposite. We already have groups of different speeds, we just have a formal model that does not allow it, and this generates constant friction…
There is a perverse and ridiculous system, because we impose brutal conditions on countries for accession [to the European Union], but once they join, they have disproportionate power in relation to their weight. This cannot continue; this is not how you build a space for global leadership. The lowest common denominator has never been a good policy for progress.
Still in Europe, does this expanded defence investment programme make perfect sense to you?
Yes, it does. I think the United States is right on this point – one of the things the United States is right about is that we need to be balanced in these matters. We remained in the shadow of the banana tree with the nuclear and military support of the United States, which proved to be a mistake. Europe must have its own common army and must increase its defence efforts, and I think Portugal has to show solidarity with this and has a huge opportunity to take advantage of these efforts, particularly to develop its navy. We probably have the largest exclusive maritime zone in Europe, and therefore increasing our investment in the Navy may even have positive economic impacts on the defence of our fish stocks, the exclusive economic zone, preventing drug trafficking, etc. So I think we have to do that. And in the case of Portugal, it should obviously be geared towards the Navy.
Especially during Donald Trump’s second term, ESG principles have been under attack. Is it possible to reconcile greater competitiveness and economic reforms with the pursuit of greater sustainability, both environmental and in a broader sense?
ESG is in itself a valid goal, but it has been poorly marketed because it was sold to people as an economic opportunity, which it obviously is not. It is an economic constraint. If we want to have a sustainable planet, which we obviously must, we have to have restrictions on how we develop and affect the planet. Therefore, it is growth subject to restrictions, when it was sold as an opportunity for growth, which it is not. Now, the pendulum has swung the other way and, in my opinion, we have to be clear in our thinking that companies exist to create wealth, as we discussed earlier. Now, wealth cannot be created with externalities such as ESG, especially in the environmental area, where development harms the planet and areas other than businesses. Therefore, there must be restrictions, and these restrictions represent a cost to businesses. As the environment is global, restrictions must be applied on a global scale. In this regard, we must move forward globally, especially in terms of the environment, with a clear understanding that this is a restriction, and with a clear understanding that less developed countries need, in a way, to pollute more in order to increase the development of their populations, which we did centuries ago. There must be agreements and solidarity between more developed countries and less developed countries.
In short, I think it is a valid concern, knowing that it is a restriction on development to protect the planet and the future of our children and grandchildren.
This was the year of the great affirmation of artificial intelligence (AI), which will only accelerate, is already accelerating, and is a type of technology that tends to accelerate more and more. Looking at AI, which will accelerate even more in 2026, do you see the glass as half full or half empty, also taking into account possible side effects, particularly in the labour market?
I think artificial intelligence, which in my days was defined as econometric models, is very positive, with very cheap computational data processing capacity and the harmonisation and availability of this data. Therefore, as long as these models are correct, unbiased and treated properly, productivity increases enormously. Any young person, any student, anyone today, does not need to accumulate knowledge, they need to know how to ask the right questions and ask ChatGPT or Perplexity and have the answer automatically available. This greatly increases productivity. From a macroeconomic point of view, it has led to enormous growth in the United States. The big question that arises is whether this economic growth, based on investments in AI, on spending astronomical amounts of money to create data centres, will really have an adequate payback or not. And that is the big question. The financial markets have bet that it will, they have brutally raised the value of companies linked to AI, but there are some reasonable doubts about the payback on these investments. Now, for the general population, it is a major development, changing the way we work and study. Students need to know what to ask rather than what to memorise, which is very positive.
Looking specifically at the labour market, if the revolution is as intense as some people think, shouldn’t we, as a society and also as political powers, be thinking about how we are going to deal with this new reality? Are we doing enough in terms of strategic thinking about the future?
I think these are great questions. I think both the government and universities should think about the implications this has for the curriculum. The government should be thinking about how we are going to retrain people who will have to change professions, universities should be thinking about what courses to offer, and the government should be thinking about how to adapt school and college curricula to create the skills that young people will need for this future. But beyond this issue of transition, the result, as it was in the industrial revolution and the digital revolution, will always be the same. People will be more productive, earn better salaries and therefore earn more for the time they have available. But there is a very important transition to be cautious about, and enormous care must be taken, which I am not yet seeing, in adapting curricula to train young people in the skills that will be important for the future.
For António Horta Osório to reach the end of next year and be able to consider that 2026 was worthwhile, what would be important for that to happen?
Firstly, I think it’s always worth reaching the end of 2026. We have to enjoy life, don’t we? There’s a saying that we all have two lives, and the second one begins when we realise we only have one. So every day on Earth is a positive day. I think we should make the most of it for the benefit of the people we care about, the people we can help. In that respect, it is always positive to reach the end of 2026. Now, we may end up better off or worse off. And I think that very relevant aspects next year will certainly be the development of the situation in Ukraine, where European solidarity is fundamental. The Ukrainian people are stoic, invaded, and have resisted stoically, and Europe would be short-sighted not to support the Ukrainians to the best of our ability. Because if it is not Ukraine, the conflict will spread to Europe. I think this is one of the most important aspects of next year, which I would like to see resolved. Not just resolved, but well resolved.
Furthermore, I hope that no other conflicts arise and that the volatility of geopolitical and financial events does not increase significantly in 2026. We have financial markets with very positive expectations, which may sometimes not be met, and within the European economic area, I hope that European leadership as a whole can improve with the actions of Chancellor Merz in Germany. I think this is very important for the European economic area.
As for our country, Portugal is very well regarded abroad. Portugal is considered something of an oasis, given the fact, as we mentioned earlier, that we have balanced public accounts and are growing above the European average. This is very positive. I hope it continues, but we should have the mindset that it is always possible to do better. We can always do better, we should always try to do better. And I think that Portuguese society currently needs higher growth to improve the quality of life of the Portuguese people, which is something the country still has pending.