Welcome to the Official page of the Presidency of the Portuguese Republic

Let me start by saying how pleased I am to see you all here in Portugal, on the occasion of the meeting of the distinguished International Advisory Committee of the Bosch Group.

I appreciate Franz Fehrenbach’s kind invitation for me to join you this evening and I must say that it is definitely a pleasure that the city of Porto – just where the Bosch Group first set its presence in Portugal, more than 100 years ago – has been chosen this time as the venue for your annual conference.

I would like to share some views, first, on the European Union, and then on Portugal.

The pressures of the last few years have been weighing quite heavily on Europe and the euro area in particular. The European Union somehow moved into the epicenter of the economic and financial crisis and under close international scrutiny. The experience shows, however, that the EU has been able to overcome difficult issues many times before.

The global financial crisis exposed a number of shortcomings in the institutional architecture of the European Union and particularly in the euro area governance framework.

Persistent macroeconomic imbalances, competitiveness losses and hardly sustainable public and private debt levels built up in several Member States. While seriously hitting the more vulnerable economies, tensions spread out, through contagion effects, to the euro area as a whole. The financial linkages and the economic interdependency among Member States were clearly underestimated at the time.

Hesitant and weak as it initially was, the EU response to the sovereign-debt crisis has since gained new momentum. Clear political willingness to rise up to the challenge and strong policy action in important areas have averted the risks of a euro area breakup.

While there is still much to be done on the road to a genuine banking, fiscal and economic union, Europe has indeed come a long way, over the last two years, in addressing the main inconsistencies in the original design of the Economic and Monetary Union (EMU).

It is only fair to say that the European Central Bank’s non-standard measures and President Draghi declarations have played a crucial role in stabilizing markets and safeguarding the financial system along the different stages of the crisis.

An integrated financial system demands, however, an integrated system of banking supervision and resolution.

The establishment of a European Banking Union is already underway. With the agreement on a Single Supervisory Mechanism, which entrusts the European Central Bank with the responsibility to oversee bank management throughout the eurozone, the first key element of a full banking union will therefore stand in place.

Still, beyond integrated supervision, shared mechanisms for deposit guarantee and for bank resolution are also essential. The case of Cyprus highlighted the need for clarity ex ante on how bank failures will be handled. These initiatives will be instrumental in breaking the link between banks and sovereign debt which is still much behind the current credit market fragmentation we see across the EU.

Important steps were also taken on the economic governance front. With the so-called 'six pack' and 'two pack', budgetary discipline and the assessment and coordination of economic policies were significantly strengthened.

Also, by signing the Treaty on Stability, Coordination and Governance, Member States have legally underscored their commitment to sound and sustainable fiscal policies.

The euro area has now a permanent crisis resolution mechanism, the European Stability Mechanism, with the capacity of providing financial assistance to the tune of some 700 bn euros to countries in financial distress.

More steps towards fiscal union are also important to further strengthen the foundations for the Economic and Monetary Union. That will surely take time, and further discussion by members to choose the precise end point.

But investors are making decisions today based on their perceptions of what Europe will be tomorrow. It is important to clarify that change is coming, that there is a shared sense of direction, and to commit to sustained action, now and in the future.

The growth challenge remains central to Europe. The risk of an overall stagnation is not remote. But of course there is no silver bullet, no single action that will fix all the problems and restore growth and employment. Rather, Europe needs to act on several fronts, wherever action can make a contribution to recovery. And no Member State is exempt from this collective responsibility.

Halfway into the demanding Adjustment Program agreed in mid-2011 with the EU and the IMF, Portugal has been making clear progresses into redressing the economic and financial imbalances and the country’s structural fragilities.

Against the background of more-difficult-than-expected economic external conditions, the end-2012 fiscal deficit target was met, financial sector stability has been safeguarded, and a wide range of structural reforms – including an extensive privatization program – has moved forward on several fronts.

External account adjustment has been particularly impressive. In 2012, for the first time in decades, a surplus position was attained. Exports growth, especially to new markets outside the EU, accounts in good part for this result.

Despite some setbacks, the fiscal adjustment has also been striking – an estimated 6 percentage points of GDP reduction of the primary structural deficit over 2011–12.

In January 2013, and for the first time since the beginning of the Program, the Portuguese Treasury has been able to tap bond markets. Last week, a well-succeeded 10-year-bond issue set the stage, earlier than foreseen, for Portugal to meet the objective of regaining full access to the bond markets.

Portugal and the Portuguese people have shown a clear sense of commitment and responsibility. This has been recognized by our European partners and by the markets.

Solid foundations for economic recovery are thus being built. Creating a more flexible and competitive economy and improving the business environment have been the main priorities behind our reform agenda. Private productive investment is certainly key to Portugal’s economic future.

Let me say that excellent investment opportunities do exist, along with a qualified, skilled and motivated new workforce generation.
The experience of German companies operating in Portugal has always proved successful. The Bosch Group, in Portugal for more than 100 years now, is a case in point. I was pleased to hear how the Group acknowledged the support that their projects and investments in Portugal enjoyed in all circumstances, and how highly the Board valued the competence and capacities of the Portuguese workers. Your presence and performance has certainly been beneficial to the Portuguese economy.

Thank you again, Mr. Fehrenbach, for your invitation, and thank you all, distinguished members of the Advisory Committee, guests, partners and representatives of the Bosh Group, for your attention.

I hope you have enjoyed your stay in this beautiful city of Porto and wish you may again visit us sometime soon.

Thank you.