New Portuguese PM pledges end to debt ‘drunkenness’

New Portuguese Prime Minister Pedro Passos Coelho vowed to sober the rescued country up by ending “debt drunkenness”, and promised to balance public finances urgently, in remarks marking his investiture.

And the newly installed Finance Minister Vitor Gaspar was heading into his first talks later on Wednesday with representatives from the EU, the European Central Bank and the IMF, which are financing a debt rescue, a source close to the European Commission in Lisbon told AFP.

The debt crisis in Portugal, alongside the crisis in Ireland and the most serious crisis in Greece, is causing deep concerns internationally about the resilience of the entire eurozone.

Coelho heads a centre-right Social Democratic and right-wing CDS-PP party coalition government, elected to replace a Socialist led administration overtaken by a debt crisis and the rescue by the EU and IMF.

“Portugal knows from experience that drunkenness on debt amounts merely to illusory and brief well-being until the bill and collapse arrive,” he said on Tuesday, promising to honour commitments under the rescue programme.

“We will reduce the debt to win back our capacity to decide more freely and make our own choices,” he said, speaking of regaining “political autonomy.”

Coelho promised that he would “hide nothing of the scale and urgency of the challenges we face.”

He declared: “Our priorities are clear: stabilise the finances, look after those most in need, get the economy and employment growing.”

He warned that “putting public finances on a sound footing is an urgent imperative to cope with problems in the short term. But above all it is a necessary condition if we are going to have a prosperous economy which can create jobs in the medium term.”

He declared: “Portugal will not fail. I know that we will not fail.”

Before he spoke on Tuesday, President Anibal Cavaco Silva urged the new government to “act immediately” so as to “ensure firstly that the programme is respected rigorously.”

The president said: “The international commitments taken on by Portugal amount without any doubt to a programme of great responsibility, particularly as the timetable laid down to accomplish the various measures is extremely short and because achievement of the different targets will be checked carefully, both by international institutions and by the markets.”

He continued: “Carrying out the programme will entail many sacrifices but this is inevitable.”

The “costs of failure would be absolutely catastrophic and would last for many years, putting the future of coming generations seriously in doubt,” he said.

Portugal, which is burdened by a heavy debt load of 160 billion euros ($223.5 billion) at the end of last year, finished 2010 in recession. The public deficit of annual expenditure over income was 9.1 percent of national output and the unemployment rate exceeds 11.0 percent.

The last Socialist government, on the verge of being unable to pay its bills, had to negotiate a rescue from the European Union and International Monetary Fund, becoming the third eurozone country to do so after Greece and Ireland.

Under the rescue, Portugal is to receive a loan of 78 billion euros over three years, but this is conditional on the application of tough measures to control public finances and the introduction of reforms, including privatisations, to improve the weak structure of the economy.