Mr. Passos Coelho. Good afternoon everyone. I would like to thank the President of the Spanish Government for visiting us here in Lisbon. I believe that this is the first trip the President of the Spanish Government has made within a European context and is similar, to some extent, to the first I had the pleasure of making as Prime Minister of Portugal to Madrid when, shortly after taking office, I travelled abroad for the first time beyond the context of EU Summits or Councils.
I would also like to take this opportunity to congratulate the President of the Spanish Government on the very decisive manner in which he has started his term of office. It is clear the European Union is going through a tough time, one that is affecting all countries in general as everyone is suffering quite severe systematic risk. The Portuguese Government has high expectations for the work the Spanish Government is undertaking, a path of structural reforms and financial stability, and that will also provide a significant contribution to the economic recovery we all need to achieve within the European Union.
The Portuguese economy, in the same way as the Spanish economy, is highly integrated within the European economy. Hence whatever happens in the European Union obviously has a major effect in Portugal and in Spain. Furthermore, the level of integration between the two economies - the Spanish economy and the Portuguese economy - is also very high, and hence whatever happens in Spain is very important and has a significant impact on Portugal and vice versa, whatever happens in Portugal also has a significant impact on Spain.
Undoubtedly the structural reforms and budgetary consolidation policies that our two countries should carry out are very important to allowing us to return to growth and job creation, both in Spain and in Portugal.
This has not only been an important occasion to exchange opinions on matters on our bilateral agenda, but also on what is happening in the European Union. For these reasons we have agreed on a common stance in light of the informal European Council meeting that will take place on Monday 30 January. We have a common vision of the challenges faced by the European Union and we agree that it is very important for Europe to create certain mechanisms to avoid the contagion of other countries tied to the Greek situation on the one hand, and on the other hand, we agree that this whole path we have been going down towards budgetary consolidation and structural reforms may be reflected in and supported by policies whose objective is growth and employment throughout the European Union, but particularly in the Eurozone.
From this perspective, the President of the Spanish Government and I agree that the first major task at a European level is to gain standing for decisions that are taken at the level of the European Council. And, from this same perspective, achieving compliance with all those decisions already adopted, and given the point in time, with drawing up the Inter-governmental Treaty so that they can come into force as soon as possible, so that both our citizens and the markets can once again have confidence in the European institutions and European Governments can feel aligned with the same objectives, including those of overcoming this debt crisis, the so-called European sovereign debt, but also work towards a programme of economic growth and support for employment.
Finally, and given that there is a very varied range of issues that are important at a bilateral level, the two Governments have agreed that Portugal and Spain will very swiftly re-adopt levels of excellence in their bilateral relations, which for various reasons have been less active over the last few years, above all as a result of the elections that have taken place in Spain. To this end, we have committed to holding a bilateral Summit in the spring.
At the end of this year, the Ibero-American Summit will take place in Cadiz, where Portugal will obviously be present with a delegation headed up by the President of the Republic and which also includes the Prime Minister and the Minister for Foreign Affairs.
Consequently, I would once again like to thank the President of the Government, Mariano Rajoy, for coming to Lisbon on this his first visit within Europe and remind him that we will always be willing to improve relations between our two Governments, agreeing and better coordinating our positions, both within the Iberian Peninsula and within the European Union. Spaniards and Portuguese must get involved with the coming actions between our two Governments. All the good things that can be done on both sides of the border can only benefit economic growth and employment, which, in the end, are what most concern our respective Governments at this time.
President of the Government. Ladies and gentlemen, good afternoon to you all.
I would like to start this short speech by thanking the Prime Minister for his warm welcome and the treatment we received. For me, as a Spaniard, it is a great honour and I am proud that my first visit as the President of the Government to a European Union country should be here, to Portugal; a much-loved country in my eyes as I am from Galicia and I have had the opportunity to travel the length and breadth of this country on many occasions.
I should like to convey to the Portuguese people the solidarity and affection of the Spanish people, who feel empathy with the difficulties suffered here and are willing to jointly seek a framework of confidence and prosperity for the future.
I believe that the Prime Minister has explained the objectives of this meeting very well. I will make a few comments and probably go into more detail in some of the areas he has touched upon.
We have spoken about the difficult situation that our economies are going through, both the Portuguese economy and the Spanish economy, and the difficulties that many Portuguese and Spanish citizens are going though at these times, and we have spoken about the measures that the two Governments are currently implementing.
I would like to say that the Portuguese Government, at least that is how I see it, is acting very bravely, very courageously and very determinedly, tackling a very difficult situation that demands many sacrifices; but I am absolutely convinced that, should it continue in this serious and sensible manner, it will soon see the effects of good policies.
For our part, in Spain we will do something similar, because we need to do that, and we are going to have to, some have already had to, take difficult decisions looking at the medium- and long-term to move towards an era of sustainable and stable growth.
Only five days after taking power, my Government took a decision to reduce the public deficit by 15 billion euros. We had to raise takes by six billion euros and reduce expenditure by nine billion euros, and in the coming weeks we will present the labour reform act, a plan to restructure our financial system and this coming Friday, in the Council of Ministers, a Budgetary Stability Act that will affect all public authorities, both Central Government, the autonomous regions and local councils, to the effect that they cannot spend what they do not have.
I repeat that these decisions, and some more, quite a few more in fact, that will need to be taken in the future are necessary and essential for Spain and, if you will allow me, for Portugal as well, in my opinion.
We have also spoken about Europe, because although we all need to put our own houses in order and do our own homework, it is also important that these things are done well jointly in Europe.
Spain is in favour of the Treaty that will be debated on 30 January in Brussels. We would like it to be definitively approved, to be signed straight away, come into force and that we all comply with our commitments. We are in favour of the Treaty, because we are in favour of controlling the public deficit, of not having high public debt, and because we are in favour of having a bailout mechanism, the bigger the better, that can operate as a deterrent against certain things taking place that we have seen recently.
We are also in favour of finding a solution quickly to the problem of Greece. I believe it is something that should be done as soon as possible to return to a situation of normality with the objective of creating jobs and recovering economic growth.
We will support, because it is a debate that will be raised there, all the reforms that are necessary to improve the competitiveness of our economies - Portugal has just announced its labour reform and Spain will also make its proposal in the coming weeks - and they need to be implemented; but it is also important at this time that there are liquidity instruments that enable the economy to be financed and that support is given to those who meet their objectives, are serious and keep their word.
Hence, I believe that we agree on the fundamental issues. I believe that it is very important for the two countries to have a constant collaboration, almost on a daily basis. I believe that a great many things unite Portugal and Spain, as all of you are aware; but I believe that what unites us most is our future and we are going to work to attain this future. That is why we want these bilateral Summits, the last of which was held in 2009, to once again take place and, as the Prime Minister announced, we will hold a meeting in the spring to tackle bilateral issues; as of now we will begin working on the agenda and content of this Summit.
For Spain it is also very important, and I believe that for the whole of Ibero-America, that the Ibero-American Summit that is scheduled to take place in November in the city of Cadiz is a success. I believe that Ibero-America is important for both Spain and Portugal. So many things unite our two countries, above all, as in our own case, the future necessarily unites us.
Thank you very much. I repeat, for me it is a real pleasure and an honour to be here, once again, in this magnificent city of Lisbon.
Q. Mr. President, good afternoon. The International Monetary Fund calculates a deficit for Spain in 2012 of no less than 6.8% and 6.3% for 2013. With these figures, Mr. President, do you still maintain that Spain is in a position to comply with the figure of 4.4% set by Europe? If that is the case, will there be more cuts, more budgetary measures? At any event, do you believe that Europe will be flexible in the deficit objective for the Eurozone?
I had a second question, which almost goes hand-in-hand. As regards the labour reform, it would seem that an agreement in principle was reached. Can you announce anything in this respect and assess this measure, this labour reform, please?
President of the Government. That is right, the International Monetary Fund, in the last few days, as well as announcing negative growth for Spain for 2012 and even for the following year, 2013, announced today the deficit figures for 2012 and even for 2013. Economic forecasts are always debatable, regardless of which body they emanate from, the IMF, the European Commission, the Government itself or any other political party; but, from this announcement or this forecast of the IMF, I take away one thing: this reaffirms for me the fact that we need to do our homework.
We have already made a reduction in our public deficit, I repeat, in the first Council of Ministers on 30 December, of 15 billion euros. I believe that we have to continue making reductions in the Budget and we will do this in this year's Budget, which we will present in the first quarter of the year, as I said, in the month of March, and we will once again reduce expenditure. But I believe that this should be accompanied by economic growth policies, because we are not only fighting against the deficit through reducing expenditure, but also through increasing revenue. That is why the structural reforms are so important and that is why we will carry out a labour reform and a reform of the financial system; we will then move on to energy policy and afterwards, or at the same time, to the Law in support of entrepreneurs.
Hence, the forecasts of the IMF are a stimulus for me to work harder and more courageously, at a time which for Spain is very difficult. Furthermore, the effects of the policies will not be seen in three months or six months, but we are obliged to work to create jobs and to work hard to do so. That is what my Government is going to do. We know that things are not going well, that things are tough, and it is not necessary that the International Monetary Fund reminds us of that, although it may, as it has done; but, I repeat, for me this is a stimulus to do things well in the future.
As regards the labour reform, what has already been announced, or filtered through, or we have become aware of, is an agreement in principle. Hence, any assessment that I may make on this matter is conditional upon a binding agreement being reached. In reality, this agreement relates to salary conditions for the coming three years: 2012, 2013 and 2014. Should what we have heard be confirmed, I would have to say that the trade unions and business associations have done what Spain needs. The measure they have announced is also complex and probably difficult to take, but I believe that it would be a very positive step forward and a wonderful message to send to the economy of this country. Let's hope this is confirmed because, I repeat, it would be good for Spain.
From thereon in, it is something that falls to the will of the parties; it is simply our obligation to agree on the areas on which no agreement is reached, which is basically on the matters that comprise the labour reform, in making a proposal. As the Government, it falls to us to submit the proposal to Parliament, and as I said before, we will do this at the right time.
So, if what we have heard is confirmed and what we have seen published in various media is confirmed, I would have to say that this is a wonderful message and something very positive for the general interests of all Spaniards.
Q. I had a question for the President of the Spanish Government. Merely a clarification, do you believe that the European Union authorities, given that the forecasts of the International Monetary Fund not only apply to Spain, but to all economies, including the European powerhouses, will in some way relax the conditions for complying with the deficit objective, I insist, not only in the peripheral countries but in the whole of the European Union?
I also had another question that is not related to the economy. I wanted to ask whether the President of the Government believes that the terrorist organisation ETA has a latent infrastructure and if so, whether this latent infrastructure could have its base or try to establish its base here in Portugal. The same question is for Mr. Coelho if he wishes to respond to it.
President of the Government. The first question you asked is about whether, in light of the growth forecasts for the European Union, a change will take place in the deficit objectives of all the countries in the European Union. We'll look at that in a moment.
What I would like to say is that Spain will meet its deficit objectives as set out in the Stability Programme. Have no doubt about that. It is currently set at 4.4% and Spain will meet that objective.
As regards the matter of ETA, I am going to say something that I believe all Spaniards understand very well: ETA exists, it exists today. ETA has said that it will stop killing and that this is definitive.
I am all in favour of that and I celebrated at the time this announcement that they would stop killing definitively. But ETA still exists and while ETA still exists it is a terrorist organisation and hence the Rule of Law is not suspended in Spain.
In other words, a member of a terrorist organisation is an outlaw and hence, the obligation of the State law enforcement agencies and of the Government, logically, is to act. Hence, while ETA exists, the Rule of Law in Spain is not suspended. It is never suspended, but much less so all the time ETA exists as a terrorist organisation; the Law and the Rule of Law will be applied because that is our obligation, quite apart from my own conviction.
Mr. Passos Coelho. I wanted to say that very close cooperation exists between the Portuguese authorities and the Spanish authorities in criminal matters, and in particular in regard to the war on terrorism. As a result of this great cooperation between the authorities of the two countries, two ETA cells that operated in Portugal were dismantled. This was the subject of very close cooperation between the two countries and collaboration between the two countries was thus possible in the sense of mitigating this problem, which is a very sensitive problem and one about which Portugal is extremely sensitive.
The only thing I can add is that this cooperation will clearly not stop, and hence, in any circumstance, in light of any information that deserves stepping up a gear on the part of the Portuguese authorities, Portugal will not cease to give this situation the full attention it deserves. But I would like to stress that at this time no information exists - I repeat, no information - pointing to the existence of any ETA base operating in Portugal, nor has there been any notification on the part of the Spanish authorities to this effect.
Hence, that clearly gives us great satisfaction and tranquillity; but it doesn't mean that we will drop our guard or cease our cooperation in relation to any activity that may appear suspicious or in any way show signs of any abnormality within the scope of anti-terrorism activities.
Q. Many observers say that it is necessary to have a second bailout and my question is whether the Portuguese Government would exclude, off-hand, a new package of external aid and if it would exclude the renegotiation of Portuguese debt.
Mr. Passos Coelho. I would like to reaffirm that Portugal will not ask for the renegotiation of the support programme from the European Union and from the International Monetary Fund. I stated clearly in Parliament, and I reassert this now, that we will not ask for more time or more money to complete the programme. It must be complied with in all its financial goals as well as its qualitative goals in matters of structural reforms. The whole calendar that has been set must also be complied with, and hence, the Government, as you are aware, is wholeheartedly set on executing this programme in an unimpeachable manner.
This is the first condition for restoring confidence in our markets from overseas and hence, from investors. We know that these changes we are making will not have an immediate impact and that their results will take time to manifest themselves, but we will remain calm as regards the Resolution of the extraordinary European Council in October and what took place at the end of July last year.
I don't know if you remember that at that time the European Union and the International Monetary Fund clearly stated that to the extent to which the countries that were still to comply with programmes of economic and financial demands, such as Portugal or Ireland, complied in a sustained manner with all the measures contained in their programmes, the European Union and the International Monetary Fund would lend all the aid necessary in the event that, for external reasons, it were not possible for any of these countries to return to the market.
I stress this because it is very important and I believe that it is a very important sign of confidence for the market. If for external reasons that had nothing to do with complying with the programme, Portugal or Ireland were not in a condition to return to the market at the date set, the International Monetary Fund and the European Union would continue providing aid to these two countries.
That thus means that our programme cannot fail for internal reasons and it is interesting for me to stress that. It cannot be that Portugal fails in complying with its programme and it shall not fail.
Whosoever wishes to comply cannot start by saying, "we must renegotiate, I want more time, I want more money and I want more…". If you want to comply, you comply and full stop. Should we show these results with the deadlines agreed, as we intend to do, we feel that market confidence will be restored.
Let me give you a practical example: we saw a reduction in Portuguese debt, in the rating of the Republic, by one of the best known ratings agencies and that is obviously reflected in the secondary market with the extension of the spread of our ten-year public debt. However, at the auction that took place to place Portuguese public debt last week, we managed, for the first time since April last year, to return to the market and achieved a rate of only one percentage point below what was paid in April 2011.
In April 2011, we paid 5.9% to place one-year debt and now we are paying 4.9%. That means that with external demand - which was pre-dominant in placing this debt - the external market confided in the results that we have presented during this time.
That is the most important thing for us. To the extent that we show specific results and not only our intention to do so, the market will end up acknowledging what we are doing and we will return to the market in a situation of confidence.
Q. The International Monetary Fund has asked the different European countries to re-consider austerity measures and to think more in structural reforms that allow for economic growth. My question is whether saying 'never' to a renegotiation, except for external questions, means saying 'never' to austerity.
A second question linked to austerity, if you will allow me. During the discussion on the State Budget, you guaranteed to the Portuguese people various times that there would be no exceptions to austerity, that it was for everybody. But it is true that the country discovered that, in the end there were exceptions, the exception of the Banco de Portugal and also of the Caixa Geral. What do you make of these exceptions?
Mr. Passos Coelho. They are different questions and I will answer the second question first. There are no exceptions. The country will see that there are indeed no exceptions. There will be no exceptions in the Caixa Geral de Depositos. The exception that exists with the Banco de Portugal is because, in accordance with the law itself, the Banco de Portugal has changed from being a public institution that was integrated in the European system of central banks, and hence, a subsidiary of the European Central Bank; which is the reason why we cannot unilaterally apply these restrictive measures that we apply to the whole public sector and even to the State business sector.
The Governor of the Banco de Portugal has already publicly expressed that the bank, to serve as an example to the administration, will make cuts, in the same way as throughout the country; that as regards the civil servants employed there, given that this direct relationship doesn't exist between the statute of the civil servants at the bank and the State business sector or the public sector, that it would apply the same in matters, not of middle-ranking salaries, but of matters of privileges that had been attained through remunerative benefits that existed with the bank's public workers. This thus means an effort that the bank is making to not fall outside of these restrictions.
It seems very important to me that the Portuguese people are thus aware that the measures were adopted, not only for civil servants, but also for the State business sector and that this will be immediately applied to the Caixa Geral de Depositos.
As regards the first question, on austerity, I believe that all Portuguese people perceive no Government carries out austerity measures for the sake of causing its people to make sacrifices.
The Portuguese people are aware that we have to make adjustments and that we have to make adjustments from a private perspective. The most worrying sign of this adjustment is unemployment, which is extremely high and there are many Portuguese people today who are making this adjustment, because their companies have closed down and they are on the dole. This is a very harsh adjustment and on the public side this adjustment will also have to be made.
We cannot return to growth in Portugal if we don't put our accounts in order first.
As regards the general recommendations of committing to polices of growth and employment, we are in full agreement with that. A sustainable growth policy cannot exist without fiscal consolidation and, hence containing public spending. But that is not enough, it is simply what is necessary. So that we can see growth in Portugal, creating value and jobs, we also need structural reforms that make our companies and our country become more competitive. If we don't have more money to spend, we have to spend better and we have to create more competitive conditions for our companies, and that is the problem of the structural reforms that we must hence implement.
Of course we are aware that within Europe there is a group of countries with very significant trade surpluses. And, given the level of economic integration within the European Union, these trade surpluses could be considered to correspond to significant trade deficits in other countries. If there doesn't exist within the European Union a concern to balance the stimulus of demand from those countries with a trade surplus, it will not be possible to drive more exports and more growth in those countries which are showing a trade deficit at this time.
But I would like, from this perspective, to underline the positive results that we have achieved in Portugal. Our foreign trade deficit has been swiftly corrected and we hope that 2012 will close with a trade surplus for the first time in various decades in Portugal, which would thus mean that our companies - taking into account the collapse of internal demand - are not only looking for other markets within Europe but also outside of Europe, which is clearly grounds for joy and optimism for the Portuguese economy.
This means that we are opening up more in economic terms, that our business leaders and our companies are managing to place well their goods and services outside of Portugal, and that can only contribute to aid and balance our foreign trade deficit, which grew over the last ten years to almost 9% annually.
It is not worth, as I mentioned earlier, blaming Europe or other institutions when we aggravated year after year, for ten years, our foreign trade deficit. We let ourselves wide open to that possibility and we didn't export enough to cover our financial needs, but we are slowly turning that around.
Thank you all very much.