Portugal’s finance minister and one of the chief architects behind its €78 billion bailout tendered a surprise resignation on Monday (1 July) in the face of widespread opposition to austerity-driven policies.
In his resignation letter to the prime minister, Vitor Gaspar says he lost the faith and support of the people to maintain a policy that has so far failed to curb rising unemployment and a deepening recession.
“It’s my firm conviction that my departure will contribute to reinforce the leadership and cohesion of the government team,” he wrote, reports Bloomberg.
Gaspar took office two years ago after working as a consultant to the Bank of Portugal from March 2010 to June 2011. He headed the European Commission's Bureau of Economic Policy Advisers between 2007 and 2010. He was also the director of economic research at the European Central Bank (ECB) between 1998 and 2004.
His professional experience was said to have earned him widespread respect among his eurozone peers.
But his critics at home blasted him for pushing through policies that have crippled the country and put tens of thousands of out work. The jobless rate in Portugal is around 18 percent.
The terms and conditions attached to the three-year €78 billion bailout agreement in 2011 required extensive cuts in social spending and tax hikes.
The commission gave Portugal an extra year in May to bring its deficits below the 3 percent limit in the bloc's Stability and Growth Pact. Its original 2013 target of 4.5 percent was eased to 5.5 percent.
Gaspar in his letter said missing the target in 2012 and asking for an extension in 2013 undermined his credibility as a finance minister. Portugal’s constitutional court had also scrapped some of his cost-cutting measures.
But leaving his post may ease the tensions among a fragile government coalition ahead of the September local elections, reports the Financial Times. The government says it is on track to exit the bailout due to expire in June 2014.
A review in March by the troika of international lenders, composed of officials from the Commission, the International Monetary Fund and the European Central Bank, said Portugal is in “the process for a full return to markets”.
Meanwhile, its economy is expected to shrink twice as much as anticipated earlier this year with debt forecasted to peak at 123.7 percent of GDP in 2014.
Further cuts announced by Prime Minister Pedro Passos Coelho in May to generate some €4.8 billion in savings by 2015 require laying off state workers.
Gaspar is to be replaced by Maria Luis Albuquerque, who is due to start her new position on Tuesday.
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