EU member states urged to match Portuguese reforms

Portuguese minister says structural reforms bearing fruit

European Union member states need to follow Portugal’s lead in undertaking deep structural reforms, according to a leading Portuguese cabinet minister.

“Portugal has done its structural reforms and now others need to follow,” Carlos Moedas, the Portuguese secretary of state to the prime minister, said today (14 March). “There must be awareness in Europe that if you are not doing the reforms then it is bad for Portugal.”

Moedas, speaking in Brussels, declined to name the member states that he thought were failing to implement reforms, but said that more needed to be done to liberalise product and labour markets and to implement the single market for services.

The European Commission last week (5 March) published a broad macroeconomic assessment of the EU’s economies. It expressed doubt that reforms in Italy or France would be sufficient for those countries to meet their EU commitments.

At the end of February, Portugal’s trio of international creditors – the Commission, the European Central Bank and the International Monetary Fund – said that the Portuguese economy was outperforming expectations and called on the government to continue with its reforms.

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Portugal continues to suffer from one of the EU’s highest unemployment rates, with 16.5% of the economically active population unemployed in 2013, according to the Commission. It predicts that the Portuguese economy will grow by 0.8% in 2013, its first growth since 2010.

Portugal’s €78 billion bail-out is expected to end in mid-May. The 2011 rescue was conditional on Portugal undertaking wide-ranging structural reforms and significantly reducing public spending.

As a result, the Portuguese government, led by Pedro Passos Coelho, of the centre-right Partido Social Democrata, has made privatisations worth €8bn, by selling off the state electricity and postal companies as well as Portugal’s electricity and airport infrastructures.

Public spending on the healthcare sector has been cut by €850-€900 million.

To make Portugal’s economy more competitive, the government has taken steps to liberalise Portugal’s services sector and make its employment laws less stringent on employers.

The government, where the PSD is in coalition with the centre-right Centro Democrático e Social – Partido Popular, has also reformed Portugal’s judicial system, making it easier for companies to settle disputes through arbitration and streamlining the country’s civil code to speed up court cases.

The reforms have helped to rein in Portugal’s budget deficit, which was 10% of the nation gross domestic product in 2010 and was last year 5% of GDP, beating by 0.5 percentage points targets set by its international creditors.

Moedas also argued that the reforms had succeeded in re-orientating the Portuguese economy more towards exports. Exports in 2009 represented only 28% of Portugal’s GDP compared with 40% in 2013.