Editor’s Note: Alvaro Santos Pereira is Portugal’s Minister of Economy and Employment and is part of the Economic Outlook panel at the Organisation for Economic Cooperation and Development (OECD) Forum in Paris.This exclusive article outlines his plans to bring Portugal back to growth. CNN’s Irene Chapple is at the forum and you can follow her on Twitter.
Story highlights
Fiscal consolidation and a credible strategy of debt reduction are crucial, writes Pereira
Pereira: We need reforms to improve our competitiveness as well as to foster investment
Engines of economic growth should be investment and exports, says Pereira
The international financial and economic crisis has brought a time of great challenges and difficulties for Europe and its citizens. These are, indeed, difficult times. Times of unprecedented unemployment. Times where our youngest struggle to find jobs. Times where our companies struggle to get financing. Times where hope and confidence have been lacking, but are desperately needed.
In spite of all these problems and challenges, it is also important to recognize that these are times of transformation and sweeping reforms in many European economies. In this context and in many ways, Portugal has been leading the path to economic reform in Europe.
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In Portugal, we strongly believe that the need to implement structural reforms and fiscal policies oriented to foster sustainable growth and job creation are a priority for our own country and for Europe. We have to make the European economy more friendly towards investment. We have to cut down taxes. We have to cut down charges. And, most of all, we have to cut down red tape, excessive procedures and bureaucracy. People in Europe need jobs and growing and competitive economies, not growing bureaucracies that stifle entrepreneurship and innovation.
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In this sense, fiscal consolidation and a credible strategy of debt reduction are crucial not only for us to have sustainable public finances, but also are instrumental to achieve sustainable long-term economic growth and to reduce the burden of debt in our economies. Why? Because healthier public finances and a lower debt burden improve a country’s global competitiveness, by ensuring the financing of our States and our SMEs, and as well as by increasing economic agents’ confidence and, therefore, boosting job creation and the level of exports.
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However, fiscal consolidation, per se, is not enough. We need reforms to improve our competitiveness as well as to foster investment. This is why in the last two years we have implemented a vast program of reforms that included, among others, a large privatization program, an ambitious labor reform, zero-licensing procedures for industry, commerce and tourism, chapter 11-type provisions to foster company restructuring, a new competition law, port law reforms, reforms in the Justice system, and the liberalization of our energy sectors.
We are confident that these reforms will have a significant impact on our economy in the short term, and will substantially improve our potential GDP growth.
However, in addition to these reforms, we need investment and we need to stabilize financing conditions to our companies.
In this context, the Portuguese government recently approved a Memorandum for Growth, a short- and medium-term strategy to boost economic growth, employment and industrial development. This growth strategy has at its core the industrial renewal of our economy. Portugal has a strong industrial base, and we want to strengthen this industrial base rapidly.
This strategy reflects our vision on what the path should be in the next years, and it is structured upon four pillars. They are: Lowering business taxes and making the tax system favorable to investment; simplifying requirements and reducing the administrative burden to business activity; strengthening and investing in the dual and apprenticeship training system and fostering and diversifying the financing of Small and Medium Enterprises.
In short, a growth strategy based on a lower tax burden and a lower bureaucratic burden. At the same time, we will invest in our future through innovation, research and development, and vocational training. A strategy in which the main engines of economic growth are investment and exports. We intend industry to play a key role as a source of job creation, investment, innovation and human capital.
Clearly, getting back to growth is a not a task for government authorities only. Public authorities have the responsibility to adopt adequate measures, in order to set the right environment and business climate, as well as to make our economies more business friendly and competitive. But in order to be successful, we also need our companies, our students, our researchers, and our workers and entrepreneurs to do their share, by innovating, by researching and, most of all, by investing in our economies.
This is exactly what we have been doing in Portugal. And in the near future we intent to continue this path by fostering even further our competitiveness and by continuing to cut the costs and barriers to our enterprises. We know that this is a difficult task.
We know that the path is often tortuous and hard. But we also know that a nation with almost 900 years of history will once again show the world that we can turn around a difficult situation through social dialogue, perseverance and the courage to reform. We know that we can, and we will, succeed.
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