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Banking

Structural reform: Portugal takes the hard road

The Portuguese authorities and people are buckling down to structural reform. But putting the economy onto a growth path is a daunting task, especially when that growth needs to come from the country’s uncompetitive exporters.

You know a country is serious about rolling up its sleeves when it declares that it is suspending four public holidays for a five-year period. Portugal’s novel way of securing more time to dig its way out of its economic morass is symbolic rather than substantial. After all, the addition of 20 working days over five years won’t do much to turbo-charge the economic growth the country needs to restore a semblance of order to its public finances. It certainly won’t do so before the crunch date of September 2013, which is when analysts believe the current €78 billion bailout package will have been more or less exhausted.

Portugal’s preparedness to rewrite its religious calendar, however, comes on top of cuts in salaries, unemployment benefits and overtime pay. It is another indication of how seriously Portugal takes its economic dilemma, which it recognizes is of its own making. "The crisis could, and should, have been better managed," says Jorge Cardoso, chief executive of Caixa Banco de Investimento (CaixaBI) in Lisbon. "But 80% of people voted last June to change things and to put our fiscal house in order. That has meant accepting pay cuts in the public sector of 15%.

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