Costa wants to recover economy without heavy loans on public accounts | Coronavirus


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 this Tuesday about the preference of the Portuguese Government for the use of the subsidy package to finance the recovery of the economy plunged into a crisis due to the pandemic.

“The option we have is to make full use of subsidies and we will not use the part related to loans, until the country’s financial situation allows it,” said the prime minister.

The chief executive was speaking 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 chief executive had explained that the plan “mobilizes grants and loans”, adding, however, that the bet on 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 a social and economic point of view, more ‘green’, but more solid from a 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 jeopardizing public accounts, already impacted by the immediate response measures to the crisis and by the reduction of economic activity.

The intention to not use the part of loans that the European recovery plan attributed to Portugal was already noticeable in the general lines of the PRR that Costa presented to the parties last week.

At the time, the chief executive divided the plan into three priority blocks (resilience, digital transition and climate transition), allocated a package of funds to each of these blocks which, added up to the 12.9 billion euros that the Government identifies as the grant amount.

In addition, it justified the parties this option for grants without loans with the impact they would have on the public debt and adding that these loans would have in return very ambitious reforms.

According to data from Banco de Portugal, public debt reached 127.1% of GDP in the second quarter, in a period when GDP fell more than 16%. Last year, public debt stood at 117.7% of GDP, with the Government predicting that as a result of the pandemic it will shoot to 134.4% of GDP for this year as a whole.

At the ceremony, the Prime Minister outlined the set of priorities that he has been presenting, said that the Government’s objective with this plan is not to return to February, but rather to prepare the economy to face new crises and called on everyone to get involved in 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 lot 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 must move forward with the changes already recommended under the European Semester.

And here he gave two examples of reforms eligible to be financed by the PRR: the reform of the regulated professions, which does not need financing; and combating segmentation of the labor market (which aims to blur the differences between workers with different employment relationships). This is the case for a reform that “only partially has a financial dimension, such as, for example, the recommendation to combat segmentation in the labor market”, said the Prime Minister.

Ursula von der Leyen was praiseworthy 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 implementing reforms, in which she “has a lot of experience” and referred to Lisbon’s advances in the digital economy, recalling the hosting of the Web Summit.

In addition, the President of the European Commission referred to a complete harmony between the national objectives of the PRR and the Europeans and considered it fundamental to have a social bet here so that nobody is left behind. “Let’s make sure that no one is left behind. This transition will only happen if it is fair, he said.


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