THE PORTUGUESE economy has underperformed in recent years, conceded Finance Minister, Fernando Teixeira dos Santos, in his recent address to the American Club of Lisbon. But he stressed that the key to recovery lay with the private sector, not the State.
At the beginning of his speech, Teixeira dos Santos mentioned his close relationship with the United States, in particular the fact that he had gained a PhD in Economics at the University of South Carolina. Therefore, he said, he had accepted the invitation to speak at the American Club with enthusiasm.
Teixeira dos Santos was serious and frank. He did not shirk from conceding his disappointment at Portugal’s performance. “We have to recognise that, over the last few years, the Portuguese economy – in the context of the competitive global economy – has not evolved favourably. It has shown historically low rates of growth, indicating a loss of competitiveness, a trend that compromises its capacity to create employment,” he said, and added that the previous model of economic development had failed, a situation borne out by Portugal’s weak export market and its low level of technological competence.
Upgrading skills is the key
to success
Teixeira dos Santos pinpointed a shortfall in training as a key explanation for failure. “Our workforce has low levels of skills and qualifications. This constitutes a major obstacle to potential gains in productivity – an essential precondition for the sustained development of our economy,” he said. But the 55-year-old Socialist Finance Minister, who replaced an exhausted Luís Campos e Cunha last July, said the road to recovery lay with the private sector. The government’s role was merely to provide the framework for growth and entrepreneurship.
His address, which could have come from a right-wing Finance Minister, highlighted how similar Portugal’s two main parties – the Socialists (PS) and Social Democrats (PSD) – are in policy terms, notwithstanding the inevitable confrontational rhetoric at election times. Teixeira dos Santos said the State could not create prosperity on its own. “In its fundamental role of giving breathing space to the economy, the State has an important function, but that must not be and cannot be exclusive. The important role falls to economic agents in the private sector,” he said.
He said that the State’s role was to facilitate competition. “We are aware that the State has an obligation to create conditions favourable to this ‘push’ from the private sector. So the government has invested heavily in this area. We recognise the need for a stable macroeconomic background, the sustainability of public finances and the creation of a climate more favourable to attracting investment, innovation and competition,” he said.
Government has reduced bureaucracy
He said that José Sócrates’ government had pledged to gradually reduce the budget deficit down to 2.6 per cent of GDP in 2008, through spending reductions and not just one-off windfall measures. The government had, therefore, sought to address anomalies and privileges previously enjoyed by State-employed workers. They had raised the retirement age of government employees to 65, restricted new civil service admissions and frozen automatic career progressions. But Teixeira dos Santos said that the measures were not just about reducing spending – they had also pledged to invest in training with special support for education, science and technology.
He said that his government had doubled the amount of technology courses, broadened the teaching of English in Portuguese schools, increased the age of compulsory vocational training to 18 and tried to promote lifelong learning.
He also cited the government’s attempt to simplify and broad-stream tax and bureaucracy – part of a wider campaign to facilitate the life of Portuguese citizens. Innovations such as the Documento Único Automóvel (Single Car Document) and the Cartão do Cidadão (Citizen’s Card) were the first steps in this direction, he said.
State must guard against
social exclusion
Nevertheless, the Finance Minister stressed the need to guard against poverty. “Apart from the attention that must be given to the economic-financial sphere, which I have mentioned, the State must also advance policies of social protection that will confront the potential for social exclusion stemming from structural changes imposed by globalisation. It is incumbent on us not to ignore this trend,” he said.
But Teixeira dos Santos concluded his address where he had started, saying there was no substitute for private initiative. “It is up to business people and managers, as the agents of private enterprise, to exercise a vital role. The government trusts in private enterprise because there is no other way of creating wealth, generating employment and so resuming Portugal’s path towards economic growth,” he said. Finally, he acknowledged the unpopularity of tax rises. “We would all like to pay less tax. So would I!” he announced at the end of his speech to laughter from assembled guests, stressing their importance in order to pay for essential services.
