Suggests two ways of improving situation
The European Stability Mechanism (ESM) has acknowledged ‘significant risks’ to the sustainability of Portuguese public debt today, suggesting the ‘swift implementation’ of the Plan for Recovery and Resilience Plan (PRR) and ‘a focus on immigration’ to contain them.
“The difficulties of long-term growth and demographic changes mean that maintaining public debt sustainability requires strong action in the medium and long term.
The swift implementation of investments and reforms under the recovery and resilience plan, combined with positive net migration, will help to contain these risks,” says the entity set up to provide financial assistance to member states facing or at risk of financial difficulties
The ESM’s annual report includes the position, and finance ministers of the eurozone have approved. In the report, the ESM refers to the Portuguese PRR, worth €22.2 billion (€16.3 billion in grants and €5.9 billion in loans) relating to 376 investments and 87 reforms.
The country has already received €8.49 billion in grants and €2.9 billion in loans, but the plan’s implementation rate so far is only at 33%.
The ESM also refers to the country’s positive net migration, with more arrivals (immigrants) than departures (emigrés), which helps offset the effects of population ageing, and supposedly “strengthens the labour market and supports economic growth in this country”.
In the chapter on Portugal, ESM notes that “the Portuguese economy returned to outperforming the euro area average in 2024, despite a slight slowdown in growth”.
“Strong corporate tax collection supported a positive general government budget balance, and public debt as a percentage of GDP continued to decline, from 97.7% in 2023 to 94.9% in 2024.”
While acknowledging this “clearly downward trajectory” of Portuguese debt, the ESM points out that it remains high and – combined with low productivity and an ageing population – poses “structural challenges to debt sustainability in the medium to long term”.
“It is essential to implement the PRR promptly and to implement key structural reforms, while maintaining prudent fiscal policies,” the ESM emphasises.
Based in Luxembourg, the ESM is an intergovernmental organisation established by the euro area member states to prevent and overcome financial crises and maintain long-term financial stability and prosperity by providing loans and other types of financial assistance to countries in serious financial difficulty.
The Board of Governors, the highest decision-making body of the ESM, is today approving its 2024 annual report.
The ESM Board of Governors comprises government representatives from each of the 19 shareholders of the mechanism, the euro area countries, with the finance portfolio. Portugal is represented by the minister responsible, Joaquim Miranda Sarmento.
The ESM continues to monitor Portugal’s budgetary situation following the assistance provided to the country during the euro area sovereign debt crisis in 2011.
LUSA
