Getting down Portugal’s debt should be government’s priority

The President of Portugal’s banking association, Vítor Bento, has warned that the government’s modest 1.2% of GDP (€3.193Bn in 2023) should not be a reason to give a breather for more government spending.

Instead, the head of the Associação Portuguesa de Bancos (APB) told the business daily Negócios that it should be used to “seal holes in the ship” of State, adding that a country that spends as much as it earns from production has to be prudent with its spending.
“Portugal does not have deep pockets. On the contrary, the surplus should be used to offset ill winds in the future,” the economist said last week.
The economist added that it was important to manage growth in public spending, and reduce debt to more sustainable levels. “We’re living in a relatively calm environment, but things can change. Uncertainty can increase, the economy could go into recession, interest rates could increase further, and a debt of this size (around €200Bn) could continue to be a very serious problem”, he said.
On spending, he added that many sectors were pressuring the government for funds, and that it was legitimate to want better conditions (meaning more pay) but the economy may or may not meet these aspirations.
“It’s also quite natural that in a situation of greater political fragility there would be more pressure from these sectors to try and gain business capacity. I admit in the coming months there will be more social tension (strikes and demonstrations), but I believe in common sense, not just from the government, but also from the opposition parties because resolving many of these problems will depend on the ability to negotiate, and for the government and the opposition parties to reach an agreement,” said Vítor Bento.