Transcript of a TVI Interview with IMF Managing Director Dominique Strauss-Kahn

April 14, 2011

Washington, D.C.
April 14, 2011

Question: What do you think, knowing what we know now, the first austerity measures that Portugal should launch?

MR. STRAUSS-KAHN: I won't call it austerity measures. On one hand, things have to be done to go back on track and everybody knows that Portugal has a problem on the fiscal side that has to be fixed. But the big set of measures that I think is important are growth measures. The problem for Portugal, having had during the last 10 years an average of 1 percent growth, is to go back to growth. That's the real problem. To increase productivity, to be able to export more -- that's the point we have to try to Portugal.

We are now discussing with the Portuguese government and it's a bit too early for us to have an assessment, but I see this problem in two different ways. Again, [fiscal situation] is an immediate problem we have to fix, to have them to fix; and the banking sector, also. Fine, that is one thing, but it shouldn't be seen as the only thing. The real job to do is to help the Portuguese economy to be more competitive and to get back for the long term on a growth track.

SPEAKER: But how can we get there?

MR. STRAUSS-KAHN: Well, there's a lot of things to do which has to do with opening more the economy, being able to have a more effective labor market, to be also able to have a more competitiveness among the tradable and non-tradable part of the economy. You know, there are many, many countries in the euro zone which have been able to improve their competitiveness during the last years, not only Germany, which is always the example which is taken, but some others, and there's no reason why Portugal couldn't do it. Many may argue that it should have been done earlier, which is true, but, okay, it's not worth discussing about this. The question is looking forward what can we do now? We are ready to help. It's our role.

Of course, some part of the measure that have to be taken for the immediate need to avoid a problematic situation in terms of fiscal are not very happy, but that's the situation we find coming into the discussion with the government.

But again, I won't -- I don't like to look at this as only austerity measures, but also growth measures.

SPEAKER: Are we talking about wages and pensions?

MR. STRAUSS-KAHN: Well, it will be the government's goal to decide how the government wants to rebuild its fiscal sustainability. Let the IMF give advice and the IMF says, okay, the correct plan to go back on track should be this, this, and this. Now, how do you want to do it? That's the way we work. And the government makes a proposal, saying, well, we think we can do it that way or that way. Then we have an assessment saying, okay, what you propose will not be as effective as you say. There's a discussion and, at the end, we have an agreement, but this agreement relies always -- it has been the case in all the programs we have -- on what the government is proposing.

We are giving the framework. You have a deficit which is very high. You need to go back to something which is smaller. We're not really, you know, a hose in terms of fiscal adjustment. And in many examples in the past, in other European countries, we have been less demanding than other partners in the system, including the European Union, because we know that some efforts are needed, but it's useless to ask something which is impossible. So we prefer going back on fiscal track a bit with a longer process, it was taking more time, but which is more realistic than asking for things which are not realistic. So we're not really asking for the maximum speed, but what we need is measures which are real measures because it's in the interest of Portugal. If you don't do it, then it will be just impossible to go back on track.

And that's the question for the current generation of Portuguese, but it's also a question for your children. I mean, it's not possible for a country to spend more in a long period than what it can afford. That has been the case for Portugal. It's not my role to blame anybody, but it has been the case. You have to go back on track in one way or anther. It's going to be painful. That's why, at the same time, we need to avoid that it will happen again and that's why growth policies are so necessary.

SPEAKER: When can we expect growth?

MR. STRAUSS-KAHN: Well, to assess this I need to have more information. It will take some time. I don't want to be complacent and tell you it's going to be easy and quick. It's not going to be easy. It's not going to be quick. It's just necessary. I need to have my mission in Portugal coming back with all the data and the details, and then I will be able to have a more accurate view.

SPEAKER: Thank you so much.


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