Q: What went wrong with the adjustment, the fiscal adjustment in Portugal, and specifically with unemployment? How can we turn that around?
A: The unemployment rate in a number of places in Europe, including Portugal, is unacceptably high.
In terms of unemployment, the focus of the (Portuguese adjustment) program has been to put conditions in place in product and labor markets, not just in Portugal but across the euro zone countries, through reforms in these areas and structural reforms in general in order to increase the potential growth of the economy. Some of those are yielding results. Now, obviously, the situation is difficult and is likely to continue to be difficult, but the starting point was extremely difficult, I would say critical. Some of these economies did lose credit market access, and the adjustment was necessary to bring the economies back to health.
So, I think that as we move forward, the emphasis on product and labor market reforms needs to continue. Now, Portugal has done a lot--one should commend them--in terms of labor market reforms. I think there also needs to be greater emphasis in terms of product market reforms, liberalization of the services sector, where there is scope to create jobs and reduce unemployment.