The parliamentary leader of the Portuguese Communist Party (PCP), Bernardino Soares, said Tuesday that the OECD’s downgrade of Portugal’s economic growth prospects showed the need for ‘debt renegotiation’ .
Soares was reacting to the OECD’s forecast that economic activity would decline next year rather than post a small gain, as it forecast in November. Portugal’s economy is likely to shrink by 0.9% in 2013, rather than grow by 0.5% as it predicted in November. Its 2012 forecast of -3.2% was unchanged from November.
‘Deep fiscal consolidation, bank deleveraging and weak external demand will leave the economy
in recession until mid-2013, and the unemployment rate is set to rise to around 16%,’ the OECD
At the same time Portugal, which has been a model austerity pupil implementing massive spending cuts and tax rises required under last year’s IMF-EU-ECB ‘bailout’ plan, the OECD said it would miss, albeit narrowly, its deficit targets (they would amount to 4.6% of GDP this year and 3.5% in 2013, instead of the agreed 4.5% and 3%). This OECD argues that this would mean further ‘consolidation measures’, that is tax rises of spending cuts, over and above the punishing bailout programme.
The right-wing government’s policy ‘hasn’t produced economic growth, jobs or an improvement in the public accounts, because when wealth is not created there is no money to pay the debt and no money to balance the accounts,’ said Soares whose party has 16 MPs in the 230 seat parliament after obtaining an 8% score, or 440,000 votes, in the general elections in June 2011.
‘That’s why we think the priority must be the renegotiation of the debt, to allow a greater availability of public funds to encourage economic activity and job creation,’ Soares added.
Soares observed that every new projection by national or international institutions ‘confirms the sense of deepening recession and increasing difficulties for the Portuguese,’ and reiterated the communists’ opposition to the IMF-ECB-EU Troika plan (or ‘aggression’ pact, as the PCP describes it) and the ratification of the EU’s fiscal compact requiring a balanced budget. This was passed in April by the government and socialist opposition.
‘It just proves that the current policy, with the current aggression pact and the [EU] budget treaty, we will only worsen the situation of the country.’
Portugal, which was given a €78 billion loan with economically suicidal strings attached in June 2011, is seen as the weakest link in the euro-zone state after Greece.