IMF praises “success” of Portugal’s bailout programme
Poul Thompson, who headed the International Monetary Fund delegation in Portugal during the bailout crisis in which Portugal borrowed €78Bn to finance the government from 2011, has praised Portugal’s performance during the ‘Troika’ period as “successful”.
In an interview with newspaper Público, he said that Portugal needed to strengthen its economy against potential shocks.
Portugal’s GDP has shown signs of slowing since last year’s high of 2.3% with GDP for this year forecast expected to be 1.8% and 1.4% by 2022.
“Portugal displayed something fundamental towards what I still think had been a successful programme: political consensus which was lacking in Greece” he said of the 2011 bailout.
“When the crisis happened in Portugal, there was clearly a sense of unity within the political parties” he said.
“When I negotiated the programme here with the Socialist government, at the same time I discretely discussed — with the knowledge of the government — the programme with the leader of the opposition party and there was a clear understanding that the measures would be supported” said Thompson.
The director of the European department of the IMF says that it was the political consensus which allowed António Costa, when he became prime minister, to ensure that there were “practically” no changes in the programme agreed with the troika.
“There was this feeling that the country had suffered, in economic terms, its Pearl Harbour moment where it was necessary to unite in order to do what was necessary. The Portuguese case confirms that it is fundamental that countries should take responsibility for their programmes and own them” he said.
The Danish IMF representative stressed that the main objective of the programme was to get Portugal back to the markets and that happened “fairly quickly” and faster than expected which had the potential to be harder and long drawn-out given the impossibility of devaluing the currency (since Portugal does not have the Escudo).
However he warned that Portugal needed to work harder to ensure it could face potential economic shocks in future by constructing a more resilient economy, ensuring there are budgetary and financial safety nets while concentrating on ways to increase productivity.
The Economic Adjustment Programme for Portugal, usually referred to as the Bailout programme, was a Memorandum of Understanding on financial assistance to the Portuguese Republic in order to cope with the 2011-2014 Portuguese financial crisis.
The three-year programme was signed in May 2011 by the Portuguese government under the then-Prime Minister José Sócrates on the one hand, and on the other hand by the European Commission on behalf of the Eurogroup, the European Central Bank (ECB) and the International Monetary Fund (IMF).
In June 2014, Portugal successfully completed the €78Bn programme with a concluding tranche of €0.4Bn disbursed in November 2014.
Portugal’s performance as a “good pupil” was widely held up in the international financial community and markets as a glowing example of how a country in financial trouble can, through spending control and cost-cutting measures (austerity), take back control of its economy and solve the economic situation on its own merits.