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Portugal will abdicate 15.7 billion euros in loans from the European Union until the country’s financial situation improves. António Costa was very clear on Tuesday about the Portuguese Government’s preference for the use of the subsidy package to finance the recovery of the economy mired in crisis by the pandemic.
“The option we have is to make full use of the subsidies and we will not use the part related to the loans, until the financial situation of the country allows it,” said the prime minister.
The CEO spoke at the Champalimaud Foundation in Lisbon, where he presented, together with the president of the European Commission, Ursula von der Leyen, the priorities of the Recovery and Resilience Plan (PRR).
Before, the president had explained that the plan “mobilizes donations and loans,” adding, however, that the commitment to recovery must be made without neglecting the impact it has on the country’s financial accounts. “We have to come out of this crisis stronger from the social and economic point of view, more ‘green’, but more solid from the financial point of view,” he said.
This means that, despite the investments that will be made and that will require funds, the Government wants to prevent these reforms and investments from endangering the public accounts, already impacted by immediate response measures to the crisis and by reducing the economic activity.
The intention not to use the part of loans that the European recovery plan attributed to Portugal was already evident in the general lines of the PRR that Costa presented to the parties last week.
At the time, the CEO divided the plan into three priority blocks (resilience, digital transition and climate transition), assigned a package of funds to each of these blocks that, added up to the 12.9 billion euros that the Government identifies as the amount of the grant.
In addition, he justified this option of grants without loans to the parties with the impact they would have on the public debt and added that these loans would have in return very ambitious reforms.
According to data from the Bank of Portugal, public debt reached 127.1% of GDP in the second quarter, in a period in which GDP fell more than 16%. Last year, public debt stood at 117.7% of GDP, and the government predicted that as a result of the pandemic, it will skyrocket to 134.4% of GDP for this year as a whole.
At the event, the Prime Minister presented the set of priorities that he has been presenting, said that the objective of the Government with this plan is not to return to February, but to prepare the economy to face new crises and called on everyone to get involved in the construction and execution of the PRR. Costa also said that Portugal wants to be one of the first to close the plan, which, having to be carried out in six years, requires strict implementation.
Labor market in the batch of possible reforms in the PRR
In addition to the priorities (resilience, digital and climate transition), the Head of Government also said that Portugal will have to make reforms. But this reform package does not fit everything. Countries should go ahead with the changes already recommended in the European Semester.
And here he gave two examples of reforms eligible to be financed by the PRR: the reform of regulated professions, which does not need financing; and combat labor market segmentation (which aims to blur the differences between workers with different labor relationships). This is the case of a reform that “only has a partially financial dimension, such as, for example, the recommendation to combat segmentation in the labor market,” said the Prime Minister.
Ursula von der Leyen was worthy of praise for Portugal, as she had been on Monday night in the statements made in São Bento. The head of the community executive said that Portugal is an “example” in the implementation of reforms, in which “it has a lot of experience” and referred to the advances of Lisbon in the digital economy, recalling the headquarters of the Web Summit.
In addition, the president of the European Commission referred to a total harmony between the national objectives of the PRR and the European ones and considered it essential to have a social commitment here so that no one is left behind. “Let’s make sure no one is left behind. This transition will only happen if it is fair, he said.
