Transcript of a Conference call on the Conclusion of the Fifth Review under an EFF Arrangement with Portugal
October 25, 2012Washington, D.C., October 25, 2012
Participants: Abebe Aemro Selassie, IMF mission chief for Portugal
Stéphane Roudet, Senior Economist, European Department
Simonetta Nardin, Senior External Relations officer
MR. SELASSIE: Thank you, and good afternoon to you all. I just want to make a few remarks on the Fifth Review. The discussions during the mission started with a review of developments through the end of July or so. The sense was that the growth projections that we had under the program of minus 3 percent for this year were boldly on track. On the budget side, spending also looked to be on track, doing even a bit better. The current account adjustment was also proceeding even more rapidly than we had expected. The two areas where there was some weaknesses were our projections with respect to employment, with unemployment continuing to run high. Also revenue performance was much weaker than we had expected, implying that the fiscal deficit targets would not be met in 2012.
But overall I would say that there was great recognition that very important strides had been made in the context of the program. Even with the slippage, two-thirds of the fiscal adjustment expected under the program would still be completed by the end of 2012.
Second, the current account adjustment that I noted earlier was much faster; if you had two imbalances at the beginning of the program, the fiscal imbalance and the current account imbalance, on the current account side we were doing way better than expected. On the labor market and product market reforms that had been put into place, market signaling also with spreads running at the very low end of the recent trading range, all very positive signs under the program, and we very much recognize that.
Another aspect, which was never far from our discussions, was also, of course, the considerable sacrifice made by the Portuguese people, that has been evident over the last year and a half or so. It was very much a part of the discussions that we were having. Household incomes have been squeezed. Unemployment, as I noted earlier, is also running higher. We all pay attention to these developments as much as possible.
The outcome of our extensive discussions was that in light of the progress that had been made given that the fiscal adjustment, a big chunk of which will have be done by the end of 2012, the agreement was that remaining adjustments should be re-phased, hence the adjustment for the fiscal deficit targets from 3 to 4.5 percent for next year. In dealing with revision, we also factored in the likelihood that the impact on growth of further adjustments would be higher.
I cannot remember how many times the word “balance” was mentioned in our discussions. A key theme was to make sure that we were striking the right balance in the program between advancing the fiscal adjustment that’s very much required, while at the same time making sure that the adverse effect that this has on employment and output would be limited as much as possible -- within the financial constraints that are there, also making sure that the debt trajectory doesn’t create problems.
In recent weeks there’s been a lot of discussion about the fiscal multiplier, what number was used, etcetera. And frankly, at our end we’ve been a bit surprised by how active and intense the discussion has been on this in Portugal. At least in the previous three or so conference calls that I’ve done, I’ve always stated -- and we have also said this in other communiqués -- that the purpose of these reviews is to make sure that the right balance is being struck in the program between adjustments and any adverse effect it may be having on growth. If you’ll remember I’ve been using this phrase that “automatic stabilizers need to be allowed to operate in the event growth turns out to be weaker than expected.” This really is all part and parcel of the idea that reviews serve this exact purpose to make sure that the adjustment continues to be recalibrated and balanced in trying to make sure that it’s not having too adverse an effect on growth as the program is proceeding. So I’ll end there and be open to your questions.
MS. NARDIN: We will now open for questions.
QUESTION: Hi. Today’s press reports that the government is considering a massive cut in the corporate tax rate to 10 percent, so that would be below Ireland’s. Has this been discussed with the IMF and what’s your view on this idea?
MR. SELASSIE: I haven’t looked at this press report and no, we have not discussed this yet with the government.
QUESTION: So you have never heard of this before? It hasn’t been mentioned either during the Fifth Review or in the meantime?
MR. SELASSIE: A tax cut to 10 percent? No. There’s been some discussion about incentives to investment. There are investment packages, existing investment packages, I think we’ve talked about reviewing those, but we’ve never talked about cutting this to 10 percent.
QUESTION: Hi, good afternoon. I have a couple of questions. I was wondering if you could elaborate on changes from the program design since September when the TSU [social security contribution measure] was still an idea, and what has come out in the budget namely from the expenditure side?
Within the last weeks, we’ve seen lots of proposals in social expenditures. In the Memorandum of Understanding (MoU) that you’ve just given us there is over one billion euros in cuts in this area. So I was wondering if that is already from your perspective included in the budget and have you seen it? And on another hand, have you found in the review any impact on poverty of these measures that are being discussed?
Your debt sustainability analysis is much more worrying this time. You actually say that it will be unsustainable if some things go wrong and the scenarios that are sensitive. So I was wondering if there was any discussion on what to do in that scenario and if Private Sector Involvement (PSI) was ever discussed?
MR. SELASSIE: We discussed a range of spending and revenue measures in the context of the Fifth Review. On our side there’s always recognition that there would be some changes to this, as part of the discussions that would be taking place in the cabinet and because of further deliberations that the government would be making. We were well aware that there would be more changes. Of course, one of the changes was the TSU, the proposal to cut social security contribution for employers, with an increase for employees. That faced a lot of resistance and the government replaced it with the personal income tax (PIT) increases as you well know. So we accepted that and have incorporated the new measure into the package. I would like to stress that the cutoff date for our report was around, I think, the 12th or so of October. It’s when we had the most complete information. There are some differences with the type of measures that were included, that we had available at that time, versus what eventually was submitted by the government to parliament. So there are some differences in the measures. The key for us was always to make sure that the overall measures were consistent with achieving the 4.5 percent of GDP deficit target. That was the key number, the overall package was what we were looking at.
Also related to this point: the government came out yesterday with numbers for September. Again, all of this information was not available to us at the time we released the staff report.
Now going back to your question on social expenditure. As I said the package of measures is somewhat different to what we had, and again this was to be expected. But yes, there were a number of spending cuts on the social expenditure side that were included in the budget. The implication on poverty? There was a lot of discussion on how to make sure that these cuts would not fall on people that could least afford it, how to make these cuts as progressive as possible. In this regard we tried to heed to what the government was signaling as being areas of spending where cuts could be made without an undue burden on poverty indicators. But I think in terms of what has happened to poverty over the last couple of years, I think the bigger effect really has come more from the fact that unemployment has gone up, than the spending and revenue measures per se. I think the bigger reason why inequality and poverty would have increased in Portugal at this juncture is the cyclical conditions and the recession and the rise in unemployment.
On the debt sustainability analysis (DSA), a big factor in our consideration about the limits on what could be done in terms of easing the fiscal adjustment was exactly the fact that the debt trajectory is now higher, gone up from something like 118 or 119 percent in the context of the Fourth Review to 123.7 or 124 percent now. There’s a higher debt now, but we think overall this is not -- the key for us is that debt continues to peak, will peak again in the very near term and from then on it will be on a firm downward trajectory. The debt is sustainable, and it’s peaking higher but manageable. And as I noted at the start also, if you look at financing conditions, where spreads are now, they’re at a much better level than they’ve been in Portugal since early in 2011. We are concerned about the debt having increased to this level, but it’s not a major source of worry.
QUESTION: Hi, good morning to you all in Washington. A few technical questions. You were saying, Mr. Selassie, you were saying that you have information only until the 12th of October so how can you explain the difference between the deficit, the target for the third quarter that you have, and the waiver you asked, and the numbers published I believe Tuesday by our government because it has like 7 to 10 billion here and the government says that it’s like 5 billion and something.
Also regarding the level of financing from the program, in your documents if you make the calculations, you have 82 billion. So can you explain? I know some part of this 1.8 or something is from the difference between SDRs, but this is not clear for me.
And a final question is regarding the sale or the concession of ANA, the airport manager enterprise. You have here on page 81 saying that “the sale of a concession for the Lisbon Airport.” Is this specifically the Lisbon Airport only or is the whole enterprise as was said before? Thank you.
MR. SELASSIE: Okay, why don’t I turn some of the specific questions to my colleague, Mr. Roudet.
MR. ROUDET: Yes, I’m going to start with the September deficit numbers. I think what is important to note is that the estimate that is in the staff report is an estimate of the deficit that was made at the time of the review, August or early September, and it was based on expenditure and revenue at the time. And at the time both the government, the authorities, and the Troika teams believed that the end September target would be missed. The report was written on this basis and the latest numbers point in a different direction. So indeed it’s just an issue of discrepancy and timing here. Also I think it’s important to note that the numbers that were published by the government yesterday are not final. They will only be final in a few weeks, and they still could evolve.
MR. SELASSIE: Sorry, on the financing I don’t think we got your question. You’re talking about the financing envelope --
QUESTION: Yeah, page 34.
MR. SELASSIE: So there’s no change. I’m not sure what’s happening, whether exchange rates -- my sense is that exchange rates between SDRs versus euros, but there’s no change in the package. Stephane?
MR. ROUDET: Yeah, there are basically three explanations to the difference. The first one is the evolution of the SDR that you are pointing to. The second one is that some of the disbursements by the European Union were made on a stock basis and the rollover is taken into account in the overall disbursements so that it also increased the bottom line in this table. It’s on a gross basis rather than on a net basis. And then -- that’s very technical, but also was paid at the beginning of the program that is also included in this number. These are the three main reasons for the difference with billion that you referred to.
MR. SELASSIE: But then I think the net numbers are the focus on and other than these technical issues, there’s no change in the financing package.
And then lastly on the ANA question, I think this is a question that you should pose to the government.
QUESTION: Yeah, but it says on your document. Sorry, but you specifically say Lisbon Airport. Why have you written something like that?
MR. SELASSIE: I think you’re reading much into that. This is in the MOU part in particular? That’s kind of the document that’s written with our colleagues in the European Commission. We can look and try and get back to you later if you wish.
QUESTION: Good morning, Simonetta. Good morning, Mr. Selassie and everyone in Washington. One of the measures that our government will put in place in 2013 is a surcharge of 4 percent on the IRS. I read in your report that this measure will remain active for the duration of the program unless the government finds more spending cuts with an equivalent impact. What I want to ask is if you think the measures that are already in that 2013 budget are enough to be able to say that we can suspend this measure in 2014? Thank you.
MR. SELASSIE: An important principle that has underpinned the whole program from the start has been that the measures that are adopted are ones that will bring the public finances to a doable position, to make sure that the decline in the debt trajectory will be sustained. The measures generally need to be permanent.
Now in the context of this 4 percent surcharge, again the understanding is that if the revenue from the other measures turns out to be higher then, of course, the surcharge can be removed. Or if other measures can be found to replace this then, again, the surcharge will be removed. There’s scope for the government to basically find alternative measures as the need arises. So we’re not dogmatic in terms of what the package of measures is. The key emphasis for us is that permanent measures are used to underpin the adjustments.
QUESTION: Hi. I just wanted to see if you could elaborate a little on this statement that’s in the report just released that says that “given the country’s high debt levels, some of the plausible shocks could lead to sustainable outcomes in which case swift policy response will be of essence.” I’m looking here basically to see if there is any target in terms of the limit that the public debt could go to before it’s called unsustainable. And then what kind of worries are behind it? And if there is a need eventually in 2013 to revise targets again, whether that unsustainable level is going to be reached? Thank you.
MR. SELASSIE: All of these -- basically the shocks that we have used to the DSA are basically the same shocks that we’ve applied in the past. More or less what you find is if you have shocks which are very severe, you are always going to find debt being placed on an unsustainable trajectory. The key really is to be able to adopt policies that are going to be able to reverse that. We don’t at all see that in the cards in Portugal.
What has changed relative to last time is that given that you have another 4 or 5 percent debt compared to what we had envisaged earlier, this is basically a reflection of the need to have accommodation of a higher fiscal deficit. We also pay heed in doing this and seeing if there’s scope to finance a higher deficit. We also believe we’re very much looking at financing conditions that the government is now facing. And as I noted earlier, these are much, much better than at any time since the program was put in place. As you guys well know, spreads are fairly low. They’re at the low end of their trading range over the last year and a half or so. As you noticed the government is issuing and is doing a very nice job of gradually rebuilding the investor base. And lastly they also had a bond swap that was completed earlier this month. These are all indicators to us that there’s a recognition by investors and by markets that Portugal has done a great deal to stabilize, to reduce its economic imbalances, and is making good strides coming out of reliance on exceptional support. So I think the DSA has not led us to be worried at all.
QUESTION: But risks have actually gone up, and I guess you sort of state that in the report, right? I mean you have like -- when it says buffers in the program that to cope for the shocks have narrowed --
MR. SELASSIE: Again, it follows that we don’t want to push the envelope too much. We don’t want to say that interest rates are declining, the government is able to borrow more, so we should push the envelope more and more. That we wouldn’t like to see. That’s the point that we were stressing there. Some of the buffers that we have in the program have been utilized in the sense that a higher debt trajectory is now being allowed for, but there’s a limit as to how much it’s going to be pushed.
QUESTION: Right, what’s the limit?
MR. SELASSIE: We need to pay attention to Portuguese bond estimates and more importantly to economic development. As I said earlier, we think that the program really has done a lot in reducing economic imbalances. And I think the program is evolving very nicely.
QUESTION: I wanted to start with ANA. You guys said that if Eurostat doesn’t approve the operation, the deficit in 2012 will be around 5.7 percent of GDP. But will the Troika accept this 5.7 or will Portugal have to do more to reduce the number?
And also regarding the increase in public debt, one of the reasons that the report justified the increase is a more conservative approach for the privatization revenue. Why is that? Are you guys forecasting worse market conditions to do this operation?
And one last question. It’s regarding the point in your report when you say that “alternative policy measures are needed to boost the economy and the competitiveness in the near term.” Can you elaborate a little bit on this?
MR. SELASSIE: On ANA I think you’re asking a hypothetical question so it’s very difficult to answer. The main thing for us has always been we look at the underlying fiscal performance rather than kind of fiscal aggregates including kind of transactions. And the key for us really is how much structural primary adjustment is taking place and ANA transaction doesn’t affect us. So we pay particular attention to the underlying evolution of the fiscal accounts taking into account the considerations, the primary balance. I think that's the better gauge of how much fiscal effort there is. On the public debt trajectory and privatization. These two are related. A chunk of the revenue from ANA is being classified above the line then privatization will correspondingly be lower.
On competitiveness, basically the story is on the one hand there has been a very rapid improvement in the current account. Much more rapid than we had envisaged at the beginning of the program. This is a testament on how flexible the economy is. On the other hand, direct measures of competitiveness--such as the real exchange have not much to explain exports growing so rapidly. The strong. export performances is something that we have been struggling to explain and worry if it can be sustained. So there is a question mark, but I think as long as performance remains as strong as it has been so far things will be fine. It is if this performance is not sustained that measures will be needed.
QUESTION: Good morning to you all in Washington. I'd like to ask a question that relates to the public debt issue. Public debt will peak in 2013 and 2014. I would like to know in your view if this could be a source of concern regarding the returning to markets during 2013 and complimentary to this which kind of instruments, non-official instruments, as the minister of finance has referred to it, could be available to the government to use? But primarily I'd like to know your opinion about the message that Portugal is giving to financial markets with this double peak in public debt. I'd like to know one thing about PIT. The government says that the restructuring of the PIT will leave an average effective rate of around 11.8 percent, but you are referring to a higher level. I would like to know what is the difference between the two numbers. And that’s it, okay. Thank you very much.
MR. SELASSIE: On your first question on market access, I've tried to explain this before, but we've always seen the return to markets being a gradual process rather than something that happened in one swoop from one day to the next. This process has started sometime back and I think is evolving much better than we could have envisaged. What do I mean here? If you look at where the T-bill market itself was where average maturity of T-bills had fallen to almost 3 months a year or so ago. Very gradually the government has built the average duration of T bills up very significantly. I think average duration is now 11 months or so.
And they've done this with declining spreads, with declining yields. So the T-bill market has been built back very nicely. There have been the issuances of beyond 12 months to 18 months in April in the more recent one. We see much the same being needed to be done on other fronts also. And the bond exchange has been done of course. This also is a sign of activity which none of us would have expected earlier.
Importantly also what markets look at is that structural adjustment of the public account is continuing, rather than a particular debt level. I think they want to be assured that the government is going to be in a position of eliminating its economic imbalances. That's the key thing that markets look at. I think if you look at all the market sentiment that has come out post fifth review that's by and large been in the right direction. It's not just Portugal specific. I think the broader Euro Area environment has improved somewhat. But I think these are all related and I don't think the broader improvements in the Euro Area on its own would have helped Portugal. Recognition of what Portugal has done is really an important driver.
QUESTION: Before that I would like to explore the idea of nonofficial financing instruments that could be available to the government during this process of regaining market access. Which of nonofficial could be --
MR. SELASSIE: I'm not sure which kind of nonofficial instrument that you have.
QUESTION: The expression was used by Vitor Gaspar, the finance minister.
MR. SELASSIE: This is hypothetical. It's difficult for me to comment on. On the PIT effective rate, we may be looking at different concepts of average effective rates so I would need to check them and get back to you. But I'm not in a position to be able to answer this now.
QUESTION: I wanted to make sure I understand something, the dynamic you feel that's at work here, which is that because conditions have eased Portugal is now going to be able to accommodate that higher debt level and absorb a slower fiscal adjustment without any change in the financing package. And I wondered if you would elaborate a little more on how much of that is a result of trust in what Portugal is doing internally, how much is that seeming stabilization of conditions say in Spain which sits next door as a large connected economy and throughout the Euro Zone.
MR. SELASSIE: The first consideration really was to make sure that the program is continuing to strike the right balance. The first exercise that we did was to try and see what reasonable adjustment could be, given the slippage as I noted earlier, the principle that we had of allowing automatic stabilizers to operate. So we rephased adjustments over two years and then looked at the financing envelop related to this, what does it imply to the debt trajectory, and then we have to consider also how reasonable this would be perceived by markets.
We tried to strike the right balance but the main kind of adjustment rephasing came from recognition as I said earlier that a lot of the adjustments -- two-thirds of the adjustments under the program will have been done by the end of this year. So significant down payment toward completing the fiscal adjustment, as required.
QUESTION: Good morning to you in Washington. I would like to -- in the question of ANA . I suppose by your words that if there is some problem with reclassification of ANA by Eurostat you will not insist with the government of taking additional measures easier to achieve the targets -- the 5.0 percent of GDP. So I would like to confirm. And my second question is about when you say in your report that without more decisive actions to raise competitiveness and employment without specific policy in this area Portugal risks to be -- a drawn out recession. I would like you to clarify what type of measures do you think Portugal should be -- the government should take to raise competitiveness and employment and if here you are referring also implicitly to the fact that the proposal of the TSU has not gone forward, if that's a measure that you would like again to see in the prospects of the program.
MR. SELASSIE: On ANA, again, this really is a hypothetical so it's very difficult for me to go there. Needless to say, we are going to be discussing this in the context of the sixth review -- how to move on that front. Right now I cannot say much. On competitiveness, no, I'm not asking for the TSU measure to be brought back, to be very clear. But there are other things that could be considered. –We are very strong advocate of structural reforms to enhance competitiveness and make sure that we claw back untradeable sector markups in particular. We need to do some analytical work in trying to identify policy induced distortions that may be at work in those sectors. So this is ongoing work.
Also there may be other ways of looking to provide a way for the tradable sector to be more competitive. We are looking at both direct and indirect costs of tradable sector firms so that we can find a way to make them more competitive. Again there is ongoing work in this area. The government is doing work and we are hoping to support that work. The importance of this again, I want to hark back to the point I made earlier, our sense is right now the tradable sector, export growth remains healthy but we want to make sure that this is sustained and why it is important needless to say is to offset any weakness that may be in the domestic sector and make sure that the growth trajectory that we have in mind can be realized.
QUESTION: I'd like to ask regarding the tax policy and the tax hikes, if you have a view or any calculations on where you think Portugal is terms of the level of indirect taxes and direct taxes. Do you think indirect taxation has been exhausted in terms of the capacity to increase taxes, and regarding direct taxes or income taxes, if you think there is still room for more income taxes beyond those that have been announced for 2013. Thank you.
MR. SALESSIE: That's a very difficult question to provide a succinct answer to. Our overall approach has been that it would be other things being equal desirable to have more of an expenditure based consolidation. Experience shows that those tend to be the ones that stick in the long run. At the same time, the composition of fiscal adjustment is a domestic and political process, so we have to heed to the considerations that the government has to take into account, so we've been flexible and not dogmatic, so we remain open. There is of course a limit as to how much you can push just one side of the adjustment, the tax side. I think what the government has done now is reasonable and something that we are supporting.
QUESTION: I'd like to go back to something you said in the introduction regarding the famous Box 1.1 in the World Economic Outlook. The media's reading was that the IMF admitted to having underestimated the impact of austerity measures and our finance minister said quite clearly that media interpretation was wrong. What gives? Is that reading correct or not?
MR. SELASSIE: Let me explain this issue on the multiplier. With a Portugal-specific answer if I may. As I noted earlier when we were beginning our work on the fifth review, what we saw was basically growth being okay. One thing I should note is you will note that under the program the growth path we have through end 2012 is very close to what we had originally envisaged – a very important thing to note. For 2012 as we were sitting down for the fifth review we noticed that growth was going to be about where we had expected at minus 3 percent, but there was a revenue slippage implying that there would be less fiscal adjustment this year than we had allowed for. What this implied was a higher multiplier being at work.
Separate from this the WEO work showed that at this juncture in many advanced countries you were seeing higher multipliers being at work. This is the central point of the WEO study, that multipliers are higher than had been assumed and we took note of that central point. I think it's very important also to stress that you cannot infer what's appropriate by way of multiplier in a particular country from a cross-country regression. Within countries the multiplier changes over time and of course across countries it also varies. So the WEO study suggested a range but that's not to be taken and applied specifically to a country. As we were doing the fiscal review discussions we had this in the background, as I said, the Portugal specific evidence of multipliers being higher, but also there was cross-country evidence from the WEO box. What we did is to say basically for the incremental adjustment that there would be in 2013, we would apply a higher multiplier to that. And this really is basically what you see -- all of this is the result of the deficit target being moved from 3 to 4.5 and also of course the revision down of the growth from 0.2 to minus 1 for 2013. This is all that package of discussions that we had.
And to repeat a point I already made: reviews offer us an opportunity to ensure that we're striking the right balance and this is something we review continuously -- the balance, here I'm talking about of course advancing the required adjustment, but also making sure that this adjustment is not having undue effects on output and employment.
MS. NARDIN: If I may, on the broader issue of the IMF, we have been fairly consistent, even before the WEO study, about the need to pay attention to the impact of austerity. We will now take a few questions together.
QUESTION: I wanted to know how worried you are that there might be a recessive cycle in Portugal like in Greece.
QUESTION: I wanted to ask what will happen in Europe during the next year in order for the program to succeed? Can you detail what is really important for you to be decided at the European level next year for our country to be able to succeed?
QUESTION: Thank you. I have a very quick question I hope. One is that the government said it will apply the recent unemployment reform which implies less time to all new employed. What I would like to understand is if this applies to everyone -- this has been a topic here as you know. I'd like to make sure on that. Also related to severance payment around 8 - 12 days there is a discussion there. The other point is understanding if it applies to -- for instance I've been 10 years in my company. Do I keep the 1 month per year during these 10 years and then be 8 - 12 days in the years after or does all my time in the company will be evaluated in the case of severance payments with 8 - 12 days.
QUESTION: Greetings, everybody. Mr. Selassie, your report states that the program has entered a more challenging phase, namely because of growing social and political resistance. Could you please elaborate on what are your concerns related to that? Do you fear that the government might back down in the face of street protests or strikes or even lose support in parliament? Thank you.
MR. SELASSIE: On the prospects for a recessive cycle as you put it, our sense is that output should bottom out early in 2013 and we should begin to see a very gradual recovery. Again this is predicated on what we see as capacity utilization in the exports and the tradable sector narrowing, these strong export numbers that we've seen cannot continue without basically more investment by firms. One constraint of course that could be on this is credit, and again if you look at credit growth to firms engaged in export activities, that has been showing more positive signs. We think that there is some support that is coming and for activity and that this will facilitate recovery starting from around the second half of 2013.
On Europe, what must be done, I think we are on the record as having advocated for both crisis resolution type measures and measures that can enhance and strengthen the architecture of the monetary union. Progress on both of those fronts is going to be paramount to facilitate the recovery in the Euro Area and with positive benefits for Portugal.
On unemployment, I think your question is related to unemployment benefit issues that are under discussion. I think again we take the lead from the government and we will move forward with what has been passed by the government -- what has been agreed by the government. I don't know what the details are at the moment, but these are among the issues we'll be discussing in the context of the sixth review. Again also on the severance pay aspect, again these are issues that are still under discussion and we'll take the lead on that also.
The last question was on this characterization of ours that the program has reached a more challenging phase. I think this simply is recognition basically of the fiscal headwinds of adjustment that has been evident this year, also the recognition that with the economy being in recession next year also there is going to be social and political pressure against further adjustment, so it's recognition of that. But if you look at the progress that Portugal has made advancing their adjustment as it has over the last year and a half, reducing imbalances the way it has, I think that has been possible because you've had broad political and social support behind the program. I think that that's what's made it possible.
Going forward it's not too much of a stretch to say maintaining this consensus, maintaining support for the program is going to be important. We very much recognize the hard sacrifices that have been made by people and more sacrifices to come still in the context of the 2013 budget. But I think you shouldn't lose sight of what the ultimate objective of this whole exercise is, to move Portugal forward to a point where it no longer relies on exceptional support, a situation where imbalances have been addressed and Portugal can return to financial markets. And importantly, that growth can resume on a sustainable basis creating jobs and putting the crisis well behind us. I think these are the objectives and this is why the sacrifices are being made and I think having political consensus behind that will make it that much easier to achieve these objectives.
MS. NARDIN: Very good. Thank you, Abebe, thank you everybody who was on the line.