Klaus Regling, the chief executive of the European Financial Stability Facility* commented that Portugal has indeed "regained sovereignty" and will achieve a "long period of sustained growth," but warned that the current euphoria over the exit from Troika oversight must not mask the fact that the state reforms must continue.
The European Financial Stability Facility supports a third of the loans to Portugal and Regling said he was convinced that the country will reach a "long period of sustainable growth," provided that it continues the reforms.
In a message released by the European Stability Facility on the day that the assistance programme to Portugal ended, Klaus Regling said that "the government and people of Portugal deserve recognition for their achievements in last three years," and made pleasant clucking noises over the patient.
"The purpose of this programme means that Portugal is again able to finance it needs with reasonable interest rates so sovereignty has been regained. Secondly, the economic adjustment that has taken place in the last three years, although it has been painful for the population, is now showing results as exports are growing again, competitiveness has been recaptured and the fiscal situation is much more under control," said Regling who added a warning that "it is not over, there is no room for complacency and the reform process should continue," and noting several important economic challenges facing Portugal.
Regling said that Portugal’s priority should be combating high unemployment, "the most important challenge facing people directly," and that the government " should also keep the budget under control," noting also that "private debt is still very high."
Klaus Regling said that the European Financial Stability Mechanism (ESFM)* will continue to work with Portugal albeit in a different way, explaining that there will be more money available but the ESFM has to ensure that the country is able to pay it back, so will be subject to an early warning system carried out together with the European Commission.
Portugal leaves the Troika owing €78 billion, one-third from the European Union under the European Financial Stabilisation Mechanism, a third from the European Financial Stability Facility, and the third from the International Monetary Fund.
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*The European Financial Stability Facility (EFSF) is a special purpose vehicle financed by members of the eurozone to address the European sovereign-debt crisis. It was agreed by the 27 member states of the European Union on 9 May 2010, with the objective of preserving financial stability in Europe by providing financial assistance to eurozone states in economic difficulty.The Facility's headquarters are in Luxembourg City,as are those of the European Stability Mechanism. Treasury management services and administrative support are provided to the Facility by the European Investment Bank through a service level contract. Since the establishment of the European Stability Mechanism, the activities of the EFSF are carried out by the ESM.
The EFSF is authorised to borrow up to €440 billion, of which €250 billion remained available after the Irish and Portuguese bailout. A separate entity, the European Financial Stabilisation Mechanism (EFSM), a programme reliant upon funds raised on the financial markets and guaranteed by the European Commission using the budget of the European Union as collateral, has the authority to raise up to €60 billion.
