Lisbon - The prime minister of bailed-out Portugal on Tuesday dismissed as potentially harmful a call for a “responsible debt restructuring” launched by 70 veteran political figures, unionists and entrepreneurs.
Their manifesto asserts that unless Portugal agrees a significantly lighter debt repayment schedule with its European partners, the “state will be tangled up in a vain attempt to solve its budget deficit problems via the sole path of austerity”, making the burden unsustainable.
Such calls are not new in Portugal, but this one brings together signatories from across the political spectrum - albeit mostly retired - including academics and the head of the influential Portuguese Industry Confederation lobby.
“If I wanted to put the country's financing and its public policies at risk today, I'd sign that manifesto,” Prime Minister Pedro Passos Coelho said during a public event.
The manifesto calls for “a debate and preparation of the best possible solutions for the debt restructuring”, aiming to significantly lengthen the maturity of Portuguese debt and reduce the average interest rate.
By pursuing such a plan, “I'd be certain to send a wrong message to those who expect from Portugal the fulfilment of its commitments,” Passos Coelho said, accusing the signatories of being unrealistic in trying to achieve “what they consider desirable without caring about the conditions on which it can be achieved.”
Lisbon is preparing to complete its international bailout, agreed in 2011 with the European Union and International Monetary Fund, in May. The country is meant to keep reducing its budget deficit for years to come.
“When the country has a very high debt stockpile, the first thing it has to do to preserve its social policies and financial sovereignty is to guarantee the financing conditions for these policies,” he said, pointing out that a debt renegotiation would harm Portugal's borrowing terms which have been improving.
Portugal's benchmark 10-year bond yields have fallen to their lowest levels since April 2010.
The bailout adjustment programme envisages that Portugal's debt will start shrinking from last year's peak of around 129 percent of gross domestic product (GDP) this year, helped by an economic recovery that began last year. Portugal's lenders and the government say the debt is sustainable and will be reduced along with budget gaps.
Among the signatories of the manifesto for easier debt terms were the former leader of the Left Bloc party, Francisco Louca, former Socialist minister Joao Cravinho and ex-finance ministers Manuela Ferreira Leite and Bagao Felix from the centre-right ruling Social Democrats.
Both the latter have long been critical of the government's austerity course and do not represent any new dissent within the ruling party ranks. No current leaders of the opposition signed the document.
The main opposition Socialists who could win next year's general election are against debt restructuring, but defend the mutualisation of a large chunk of debt in Europe in order to reduce interest rates for countries like Portugal.
Reuters