“The report says about Portugal what it says about most countries, […] that the aging population and demographic challenges place long-term pressures on public debt, as they do on public finances and competitiveness,” stated Finance Minister Joaquim Miranda Sarmento.
Speaking to Portuguese journalists at the conclusion of the European Union (EU) finance ministers’ meeting in Luxembourg, Sarmento noted that “the topic of demography and population aging did not begin yesterday with the European Stability Mechanism’s report.”
“It is something we know, [that] there are long-term challenges concerning the demographic issue, and this puts long-term pressure on public debt,” he said.
The minister also reminded that “all projections suggest” Portuguese public debt will be, in 2026, “below the eurozone average, and that is a very important milestone that hasn’t happened since 2008.”
“We must continue to reduce public debt in a forceful, consistent, and significant manner to bring it increasingly closer to, or even below, 80% by the end of the decade if possible,” concluded Joaquim Miranda Sarmento.
In a report released on Thursday, the European Stability Mechanism (ESM) acknowledged “significant risks” to the sustainability of Portuguese public debt, suggesting the “swift implementation” of the Recovery and Resilience Plan (PRR) and an emphasis on immigration to mitigate these risks.
“Given the challenges of long-term growth and demographic changes, risks to public debt sustainability remain significant in the medium and long term. The swift implementation of investments and reforms under the PRR, coupled with positive net migration, will help mitigate these risks,” indicated the ESM.
In its section on the country, the eurozone rescue fund noted that despite a “clearly downward trajectory” of Portuguese debt, it remains high, and coupled with low productivity and an aging population, poses “structural challenges to debt sustainability in the medium and long term.”
“It is essential to timely execute the PRR and implement key structural reforms while maintaining prudent fiscal policies,” the ESM further stressed.
Headquartered in Luxembourg, the ESM is an intergovernmental organization established by eurozone member states to prevent and address financial crises and ensure long-term financial stability and prosperity by providing loans and other types of financial assistance to countries in severe financial difficulty.
The ESM continues to monitor Portugal’s fiscal situation following the assistance provided to the country during the eurozone sovereign debt crisis in 2011.
