Ex-Lloyds boss calls for government surplus to be used to stimulate the economy

The former boss of the UK’s Lloyds Bank, Sir Antonio Horta Osório says that any government surplus should be used to stimulate Portugal’s economy.

The celebrity banker, in an interview with the business daily Negócios, also applauded the government policy of reducing IRC tax and also argues for a reduction in the Taxa Social Única or TSU which is a mandatory contribution to Social Security in Portugal paid by both the employer and employee and serves to cover unemployment, sickness, maternity leave, among other things.

“For the first time in 50 years of democracy we have balanced accounts, something we never had, and I have been saying for years that this is important. However, balanced accounts does not mean a surplus.

Our sovereign debt has fallen 4% a year. Since the nominal growth production rate is around 5% or 6% and interest rates are at around 2% or 3%, the GDP debt falls. The question that we have to discuss as a society is: do we maintain the downward trajectory of the debt on GDP. Yes.

But the main topic now is ensuring economic growth above our comparable competitors and improving Portuguese salaries which are clearly low compared to Spain and Ireland, or even the emerging East European countries like Poland and the Czech Republic that have reached or even overtaken us in this regard,” he said.

The banker said it was very important to have a serious discussion about the budget surplus or even running a slight budget deficit which could be applied on measures that would have a positive multiplying effect on the growth of the economy and GDP.

“A Spaniard earns 30% more on average than a Portuguese while the EU average is 50% more, and the Irish earn almost three times more than a Portuguese.

“The government’s programme foresees growth of 3% per year, but this is not totally satisfactory. Why shouldn’t we grow 4% or 5%?

Sir Antonio Horta Osório said that State spending (and size) should be reduced to free up money for the Portuguese while the multipliers should support companies since they created wealth with incentives to exports and innovation.

“Throughout history, it is innovation, technology and trade with other countries and regions that have other comparative advantages that has created wealth.

Second, lowering taxes while spending on defence needs to be well figured out so that it does not upset the fall in the public debt regarding the GDP. “Like in insurance, we have to have armed forces in the hope that we’ll never have to use it.”