ANY QUOTES USED MUST BE ATTRIBUTED TO JEFF RANDALL LIVE, SKY NEWS

DHARSHINI DAVID: Portugal’s efforts to turn around its crisis-hit economy appear to be paying off and today official figures showed it had swung to a current account surplus of €1.16 billion for the first eight months of the year. Compare that to a deficit of €1.7 billion for the same time last year. Today though, Portugal’s Economy Minister, said he is seeking to negotiate a precautionary credit line from international lenders early next year but he remained confident that a second aid package will not be needed. Well since the country was forced to take a €78 billion bailout two years ago, it has slashed spending and last week plans to cut public sector wages and pensions were unveiled as part of the plan to exit the rescue programme next year. The Portuguese government has also been selling off state assets raising €6.4 billion from the sale of stakes in power companies EDP and REN and the airport operator, ANA. The privatisation looks set to continue as parts of the national bank, railway company, water, utility and airlines all expect to be sold off. In December the country’s postal service CTT is due to make its stock market debut. A little bit earlier I spoke to Portugal’s Economy Minister, he is Antonio Pires de Lima and I started by asking him whether his country’s recovery can continue at the same pace.

ANTONIO PIRES DE LIMA: First of all, let me tell you that in terms of financial adjustment, Portugal is on track. We have just been a [little way to the Hague] and nine evaluation were finished with success. We have presented the budget for 2014 which is quite a ed, it is totally ed now I would say, with the commitments that we have settled with our troika so on the financial side, if you look to the deficit, if you look mainly to our current account balance, you see a lot of progress. Portugal has come from 10% current account deficit to a 3% surplus just in two or three years which is almost unbelievable because that change was supposed to happen only in 2016. We anticipate the reality three years. Now to this financial story, I think we have to share with our partners the news from the economy. As you were saying, we have a growth in the second quarter and we expect this growth to be consolidated on the third quarter too. So Portugal is getting out of recession mainly due to our big, very big, very good performance on the export sector which is growing and gaining market share a bit everywhere.

DD: Which is exactly what all governments want to see of course so very encouraging news on that score but as far as the public finances are concerned, I think that’s a main area of worry still for investors. The request to have the deficit target made more flexible was turned down so is there a risk that given the instability we could see the need for a second bailout?

APDL: No, I don’t think so really. I think we made a tremendous effort and a tremendous progress over the last two or three years. Our structural deficit has been reduced by almost eight points, this was the situation in 2010. You see also that our primary balance without interest will be positive for the first time in 2014, we still have a small deficit in 2013 but much lower than the situation in 2010. Look at the current account of Portugal, we have come from a deficit of ten points in 2010/2011 to a surplus of 3% in 2013, already positive in 2012. That shows that the Portuguese companies or international companies operating in Portugal became much more competitive, the Portuguese companies are gaining market share in a lot of sectors worldwide and we have stabilised our imports so this is a big sign, an update about the reality of our financial adjustment over the last years.

DD: The export performance is absolutely stunning but that is just one piece of the jigsaw. When you look at things like public discontent for example, the kind of strikes you’re seeing, it doesn’t take a lot to blow the economy off course still does it? What happens when this current bailout agreement terminates next year, what happens after that?

APDL: As you know, we have been able to reduce the perception of risk in Portugal in terms of interest rates very strongly. Over the last two months interest rates have gone down from 8% to close to 6%. We still have room and progress to achieve in the next months but I understand that as long as we get straight to our commitments in terms of the adjustment programme and that we show our ability to execute a budget that we have just present to the Parliament in Portugal one week ago, we will get the confidence of the markets and we will be able to end up the assistance programme by June 2014. That is our expectation and that is our commitment, the commitment of the Portuguese government and the parties in the Portuguese government.

DD: If that doesn’t happen will have to see a credit line for example being extended?

APDL: Well we are looking with a lot of attention to the Irish case. The Irish started their assistance programme some months before Portugal and is getting out of the programme right now in the next months. We still have three evaluations to go with the troika, Ireland has only one evaluation to go and I think what will be negotiated with Ireland will probably also apply to the Portuguese case. We are waiting and see for what kind of attitude creditors will have with Ireland and of course we will ask for the same treatment as we are coming to the end of the programme.

DD: I’ve got to ask you this before you go, of course Royal Mail here, privatisation and you of course have got your own privatisation plans coming up later on. You have watched our case here with interest, what have you learned from it?

APDL: Well as a matter of fact it was an inspiring case that we see in terms of IPO. Over the last two years we were able to privatise four of our companies and get revenues of €6.5 billion when all the privatisation programmes that were negotiated with the troika was aiming for a revenue of 5 billion. We still have some important privatisations to be done like the postal service, CTT, a very good public company with interesting cash flows. We are so confident about this privatisation that we decided to make an IPO in the Portuguese stock market next December. It is the first IPO in four or five years, since 2008, which is of course a sign of confidence, the confidence that we have in the economy and in the evolution of the Portuguese stock market in the next months.