Portugal opposition against austerity

Portugal is wrongly following a policy of “austerity at any price” and will need at least an extra year to reduce its budget deficit to the target established under a 78 billion euro ($98.1 billion) bailout, the leader of the opposition Socialists said.

Antonio Jose Seguro warned that Europe must urgently find ways to help the weakest economies in the euro zone, but said Portugal would stay in the euro even if Greece exits the common currency.

“All the information I have shows me that Portugal has every condition (in place) to remain in the euro zone, even if Greece leaves,” Seguro said in an interview with Reuters.

He said Portugal should be given one more year to meet the budget goals agreed under the terms of its bailout, beyond 2013 when the country is envisaged returning to financing itself via the bond markets.

Portugal is currently the second most risky country in the euro zone after Greece, in terms of bond spreads comparing the yield of its government debt with that of Germany.

“I am defending (the idea that) Portugal needs at least one more year to carry out a healthy and intelligent consolidation of its public accounts,” said Seguro. “It is evident that the Portuguese cannot take any more measures, neither families nor companies.”

Seguro said he did not believe Portugal would need more bailout funds, as suggested by many economists.

He said his party stands by the terms of the bailout, but austerity must be softened to prevent the country's “recessionary s p iral” from worsening, and to achieve that, budget goals should be extended.

Under its bailout, Portugal has to post a budget deficit of 4.5 percent of gross domestic product this year, compared with 4.2 percent last year. Ne xt year it must be cut to 3 percent.

Officials from the European Commission, the European Central Bank and the IMF - known as the “troika” - are in Portugal for a quarterly review of the economy. They will meet Seguro on Friday.

The ruling centre-right Social Democrats have ruled out any extension of bailout goals or more money.

Seguro took over as leader of the centre-left Socialists last summer after the government of his predecessor, Jose Socrates, collapsed following its decision to seek a bailout.

Socrates lost an election in June last year to the Social Democrats, who have enacted harsh austerity measures under the bailout, leading Portugal into its worst recession since the 1970s and sending unemployment to record highs.

The Socialists have around 25 percent support in recent opinion polls.

“AUSTERITY AT ANY PRICE”

“This recipe of austerity at any price is not resolving anything,” said Seguro, adding that the election of Francois Hollande in France had changed the terms of the debate on how to resolve the euro zone crisis.

“If I was prime minister, I would also have to adopt austerity measures, but not in the strength and pace they are being applied i n Portugal. The policy has to change, giving priority to employment and growth and reconciling this with budget discipline.”

To do this, he said Europe needs to quickly adopt measures to help its most fragile economies, through issuing common euro-zone bonds and changing the statutes of the European Central Bank to boost its direct lending to troubled countries.

Seguro said the crisis in Europe should be blamed on Germany, with its insistence on austerity without trying to resolve problems such as unemployment in the south. “This is not just a problem of Greece, it could transform itself into a crisis of democracy,” he said. “As such, it would be good if (German Chancellor Angela) Merkel does not destroy the European project.”

He also urged Europe to come up with a solution to prevent Greece from leaving the euro, which would have “unpredictable consequences”.

“There has to be a global solution for Greece, and not one where all countries are left to try their luck,” he said.

Seguro said he had no doubt political stability would be maintained in Portugal and did not think the centre-right government would fail to serve out its term, which ends in 2015.

Political stability is seen as an important factor that will allow the country to ride out its debt storm.

He stressed that the Socialists would not try to renegotiate the bailout. “The Socialist Party will honour all our international commitments that are included in the (bailout) memorandum, namely the targets that we have adopted,” he said. - Reuters