Portugal Shedding Assets to Trim DeficitLeigh Phillips
Desperate to avoid becoming the eurozone's next debt crisis after Greece, the Portuguese government has announced a far-reaching programme of privatisation, cutting back public control in 17 different enterprises.
Under the gun not just from investors but Brussels and other EU member states as well, finance minister Fernando Teixeira dos Santos presented the plan to his counterparts across the bloc at a meeting in the European capital on Tuesday (16 March).
The plan, the Programme for Stability and Growth (PSG), would see the government divest itself of holdings in the airline, banking, energy, insurance, paper, postal services and rail transport sectors.
The centre-left government hopes to raise a total of €6 billion from the fire-sale over the next four years, with €1.2 billion coming in 2010 and €1.8 billion next year, reducing the public debt by an estimated four percent.
The document outlining the PSG argues that the privatisation blitz will contribute "to promote greater efficiency and productivity in the sectors concerned, and the essential reduction of public debt."
"The entry of private capital in companies where the state is currently the sole shareholder is a key enabler of efficiencies," it adds.
Lisbon is to offload part or all of its holdings in Galp Energias (GLPEY), Energias de Portugal (EDPFY), electricity distributor REN (RENE:PL), paper firm Inapa (INA:PL), the Viana do Castelo shipyards, airline TAP Portugal, Portugal Airports, the CTT post service, BPN bank, the insurance division of Caixa Geral de Depositos and the government's activities in the rail freight sector.
Although it has already been circulated among EU finance chiefs, the Portuguese national parliament will only debate the matter on 25 March before it is officially presented to EU authorities.
Economy minister Jose Vieira da Silva said that the government remains committed to public services and that Lisbon will "maintain a rhythm of investment and very important public initiatives."
"The PSG has a dual objective of growth and ensure stability, but we have the notion that Portugal, like many other countries in the EU, has the responsibility in the next few years to drive a rebalancing of public accounts," he added, according to Lusa, the Portuguese news agency.
The mass privatisation scheme comes atop a four-year austerity plan announced last Monday that will slash welfare benefits, freeze public sector wages and limit government hiring.
The center-left Socialist government, announcing the strategy only four days after a general strike against cutbacks, also wants to keep annual pay hikes for state employees below the rate of inflation up to 2013, to cut welfare benefits and scrap some tax breaks.
Mr Teixeira dos Santos said the plan will also establish a new top tax rate of 45 percent, but that will be the only tax raising measure.
"We are focussing on reducing spending and avoiding tax hikes," he said.
The governing Socialists had hoped to have all parliamentary parties back the plan, the far-left Left Bloc described the plan as "violent" and an attack on workers and the unemployed.
Both the Left Bloc and the Communist Party have announced they will oppose the plan.