On resigning, the ex-finance minister released a searing letter sent to Passos Coelho, in which he slammed the lack of support to complete the negotiations in May with the troika.
The main reason why Vítor Gaspar resigned on Monday from his post as minister of Finance had to do with internal divisions within the Portuguese government over the austerity measures demanded by the troika – International Monetary Fund, European Central Bank and European Commission. Gaspar wrote a resignation letter to the Prime-Minister, which was made public , where he explained that the “lack of authority to conclude the troika’s seventh regular exam in due time” in May, meant that he could not now “continue to head the team that led the negotiations which aimed to better protect Portugal’s interests”. The ex-minister pulled no punches at the inflexibility shown by the foreign minister, Paulo Portas, leader of the CDS (conservative), coalition party, against an additional tax on pensioners.
For months the press had highlighted Vítor Gaspar’s growing isolation within the Government, where almost the only support he had was from the Prime Minister in defending his pursuit of troika policies. It was because of this that Gaspar made a point of stressing in his resignation letter that the “risks and challenges facing Portugal in the coming times were huge”, demanding “Government unity “. In the last phrase of his letter, he accepted that he himself was a factor that divided the Government:
It is my firm belief that my leaving will contribute towards strengthening its leadership and Government cohesion”.
In the letter, which Vítor Gaspar ordered to be distributed to the press, the ex-minister revealed that on October 22, 2012, he had already asked to be “urgently replaced in the post”. Eight months on, “this urgency cannot be put of”, he wrote. Eight months ago, the fact that the Portuguese Constitutional Court had thrown out various budgetary measures, and particularly the Government’s decision to do a U-turn on the TSU or Single Social Tax – the reduction in social security contributions that companies were to pay to Social Security, which was to be compensated by an increase in social security payments paid by employees. This in addition to the largest public demonstration since the 1974 revolution against this measure in September 2012, Paulo Portas and the CDS also took a strong line against the troika proposal supported by Gaspar and Passos Coelho. The PSD-CDS coalition’s opposition was enormous, and eventually forced Gaspar to quit.
When the Constitutional Court threw out a second set of Government austerity measures which above all affected public sector workers, this acted as a catalyst for Gaspar’s departure. But the ex-minister also admitted that he had been way off the mark in his predictions on unemployment, growth and the economy and wrote that he no longer had the credibility to stay in the job:
Non-compliance with the original rules set down in the programme for the deficit and debt, in 2012 and 2013, was decisive as well as a substantial fall in internal demand which resulted in a sharp fall in tax revenues. Repeatedly falling short of targets undermined my credibility as Minister of Finance”, wrote Vítor Gaspar.
Gaspar’s replacement by his secretary of State, Maria Luís Albuquerque was received with criticism within the PSD party (governing centre right party), PDV has learnt from various party sources, which heads the coalition. Despite Maria Luís Albuquerque being a party stalwart, many PSD leaders would have preferred to see the Health Minister, the independent Paulo Macedo, take up the job at the Finance Ministry.
Wolfgang Schauble sad to see Gaspar go
Despite internal opposition to the appointment of Maria Luís, outsider Portugal reactions were positive. First, the Eurogrupo president, the Dutch Jeroen Dijsselbloem said that the new minister is “well known” within the Eurozone forum of ministers and stated that he would expect greater cooperation over Portugal’s recovery.
German Minister of Finance, Wolfgang Schaüble, expressed his regret, in statements sent to the Lusa news agency, at the resignation request from his “colleague and friend” Vítor Gaspar, adding that he had been decisive in putting Portugal back on track for economic recovery.
He and his team were decisive for putting Portugal on the right path to economic recovery. They insisted that investors would regain their confidence in Portugal”, said the finance head of Europe’s largest economy.
I will miss someone I trusted, someone who bravely fought for his country’s wellbeing”, added the German minister in statements sent to Lusa.
Wolfgang Schaüble today praised the choice of Maria Luís Albuquerque, until now the secretary of State for the Treasury, to the post left vacant by the ex-minister of Finance.
It is good to know that one of his closest allies will succeed him. Maria Luís Albuquerque has been a key minister in Portugal in the implementation of the Portuguese programme and in the reconstruction of the Portuguese economy. It’s comforting to know that Portugal will stay on track and that Maria Luís Albuquerque will continue the good work done up until now. I extend my congratulations and wish her the best,” said the German minister, expecting to speak to her at the next meeting of the Eurogrupo in Brussels next week.