The 12th and final review of the Troika has been completed, but it is not all over as the IMF, European Commission and European Central Bank that make up the Troika again have insisted on deep and durable changes in Portugal which represent a "break with the past."
The Troika statement was mirrored by an address by Paulo Portas, the deputy prime minister, at a press conference this afternoon and noted that the economy is making a stronger recovery than anticipated, Portugal’s access to international funding markets has improved "markedly," and structural reforms demanded by lenders have been implemented.
However, several medium-term risks have been identified. The Troika admits that getting the public accounts in order may not be smooth running and that further efforts are needed to manage some public companies’ debt levels - both are "factors that may lead to upward revisions of the deficit and debt.”
In the financial sector, the Troika praised progress in shoring up Portugal’s banks balance sheets but warns that the availability of credit is still tight - "access to bank credit at a reasonable cost is still limited, particularly for viable small and medium enterprises which already are in debt.”
"The high levels of debt in the economy, in conjunction with major funding costs in an environment of low inflation, accentuate the need for decisive action to reduce the debt of companies."
Although this is the last Troika review in which Portugal is praised for doing everything it was asked to do, the statement accentuates the need for profound changes. "The current favourable economic and financial conditions should not lead to complacency," and again it asks for a medium-term political consensus, a status that no party wants to encourage. "This will require a major break with the past and a commitment to a deep and lasting change," the country’s funders conclude.
The Troika will return, but in the future the review meetings will be twice yearly.
The Prime Minister is due to announce this weekend that Portugal will have a clean financial break from its lenders and will now be able to go it alone in the international funding markets and sell government bonds at sensible interest rates.
