Gold Magazine June - July 2013, Issue 27 | Page 80

eurozone

y market for sovereign
banks and to intervene in the secondar
reach the countries
bonds to make sure that low interest rates promise to be
d. For this
that are under stress,” he told Gol
ld be in the markets.
meaningful, however, the countries shou
to issue bonds re“That’s why it was necessary for Portugal
the ECB’s court. If the interest
cently,” he said. “Now it is in
recently by Portugal are
rate yields of the 10-year bonds issued
too high, the ECB can intervene.”
government bonds
On 4 May, Portugal issued its first new
ut two years ago, in an
since requesting an international bailo
€3 billion. The issue was a
offer of 10-year debt that raised
try’s bid to regain full
crucial milestone in the crisis-hit coun
d of its planned exit
access to international debt markets ahea
ar bailout programme. Demand
in June 2014 from a three-ye
s higher than the €3
from investors was more than three time
market has rallied strongly
billion on offer. The eurozone debt
European Central Bank
since the oft-quoted pledge in 2012 by
er it takes” to save the
President Mario Draghi to do “whatev
markets by bailout countries.
euro and speed up the return to
a heavily oversubscribed
In March, Ireland raised €5 billion in
sale of a 10-year benchmark bond.
the important role
Luis Campos e Cunha also highlighted
also
Stability Mechanism (ESM). “The ESM
of the European
markets, so we have now
has the possibility to intervene in the
the situation than we
more instruments in Europe to cope with
should also act to bring
did two years ago,” he said. “The ECB
e sure people believe that it
about the banking union and mak
keep monetary policy
is serious about the idea. It also has to
eased for the next two years, at least.”
money in the marPortugal may have succeeded in raising
ntation of the Troika’s
kets but reports regarding its impleme
ed, they are somewhat
programme are not so positive. Inde
the measures were overdisappointing, especially after some of
try’s Supreme Court.
turned as unconstitutional by the coun
ugal to be a success story,
Asked whether he considers Port
“a little too early to
Campos e Cunha told Gold that it was
y aspects. “The main
say” though it has been successful in man
try’s reputation in the markets
goal was to maintain the coun
this respect, it has been
and the possibility of financing and, in
a success.”
have been mixed and
He acknowledged that, overall, there
the country entered
even some negative results. “First of all,
that always implies extremely
into a very deep recession, and
ained. “We are currently
high levels of unemployment,” he expl
unemployment rate, at
experiencing probably double the past
of the year it will probably reach
around 17% and by the end
l point of view, that
19%-20%. From an economic and socia
have been doing very well
is a big failure. Fortunately, exports
export sector working
over the past few years, with the overall
at full capacity.”
Portugal provides
The financial assistance programme for
tural adjustments to the country’s inter
for some serious struc
implementation of these
nal market and its public sector. Has
petitiveness?
measures increased the country’s com
rts are
rs that contributed to the increase of expo
“The facto
not directly,” said Campos e
related to the Memorandum but
ate savings increased
Cunha. “You see, when the level of priv
matically stopped
as a result of the recession – people auto
before – domestic demand fell.
consuming the way they did
market would be
Companies understood that the domestic
accelerated and enpretty depressed for several years so that

78 Gold the international investment, finance & professional services magazine of cyprus

Portugal

needs stable,
predictable
policies.

couraged the export effort. And it worked. Portuguese exports
to third countries and to new markets are booming. To boost
the economy now, we need private investment”, he added. “But
unfortunately, my feeling is that private investment is not going to
pick up soon.”
Is that because potential investors do not believe in the country’s prospects for future growth? Campos e Cunha blames “unstable policies” for the lack of investment interest in the country.
“You need a stable environment to understand what the future
will be and, based on that understanding, you make a business
plan and take decisions in terms of investment,” he explained.
“When you change the tax laws, the labour laws and the regulatory environment every other day, people simply don’t know what
is going to happen.”
Professor Campos e Cunha pointed to two main factors to
which instability can be attributed. “First of all the MoU was
based on targets,” he said. “Portugal was supposed to reach a certain level of deficit and it had to implement a number of measures
to achieve this. If the measures proved to be insufficient, according
to the Memorandum, Portugal was supposed to take additional
measures. But if the targets were unrealistic or over-optimistic,
it was obvious that conditions for instability would be created.