If the economy contracts even more than what was forecast, we may have to reconsider the pace of the budgetary consolidation, said the head of IMF’s mission to Portugal Poul Thomsen quoted in the weekly newspaper Expresso.
The International Monetary Fund admits the possibility of rethinking Portugal’s budget deficit goal if the economy contracts more than expected, said the head of the IMF’s mission to Portugal quoted in an interview published by the weekly newspaper Expresso on Saturday.
If the economy contracts even more, we may have to reconsider the pace of budgetary consolidation”, Poul Thomsen said quoted by Expresso, adding that the eurozone problems “affect Portugal.”
I’m worried about the fact that the budgetary consolidation is being made simultaneously with the financial deleveraging (…) If we return (to Portugal) and see the economy sinking more than forecast (…) then we may reconsider.”
Nonetheless, the head of IMF’s mission said it is possible for Portugal to accomplish the goals of the EU-IMF bailout. “Financing is adequate (…) Besides that, two thirds of the €78bn (bailout) was enough for the first year, which is uncommon”, he said, adding that the goal for the 2012 budget deficit was not discussed with the government.
Last week Poul Thomsen joined the so-called troika of the IMF, European Central Bank and European Commission visiting Portugal for the second quarterly review of the country’s performance under the rescue programme agreed last May, saying they were “very satisfied” with Portugal’s performance.
In the interview, the head of the IMF’s mission also commented on his controversial statement that wages in the private sector should be cut. Poul Thomsen said “cutting private wages is not an imposition” and explained his point of view:
Portugal has a competitiveness problem that should be solved. There are two ways of fixing it: to reduce wages, which means the country would become poorer, or to become more productive. The favourite way is productivity.”