 you, thank you for being here today and to bear with me for this road to the recovery. But what I really wanted to do today was actually to go through this program of Portugal. But because both of our countries are under the UIMF program, it would actually be quite tempting to anchor this speech on the parallels between Ireland and Portugal. After all, we have an equal commitment and a similar strategy for a steadfast and sustainable exit from the present crisis. More specifically, we are aligned in our plan to regain normal bond market access. In this effort, Ireland has actually been a torchbearer for us, leading the way, showing us the merits of a steady patient and credible strategy. More recently, to our mutual advantage, we started working in a tandem on the issue of the extension of maturities. Prospects are actually promising of a satisfactory outcome in the not too distant future. Nevertheless, pushing these similarities further tends to mislead rather than illuminates. To paraphrase Tolstoy, happy economies are all alike, but every unhappy economy is unhappy in its own way. Portugal and Ireland entered a Troika program coming from different places, with different fragilities, with different strengths. Our programs are rightly different because they reflect each country's particular unhappiness. So I would like to use this opportunity today to tell you. First, my perspective on what brought Portugal to the brink, forcing us into a bailout. Second, tell you a little bit about what we have been doing to recover our credibility. And third and finally, I would like to conclude with some broader comments on the implications of all of these for the broader question of the future of the Euro. In early 2011, reality was actually finally catching up with my country. For many years, our country had been threading a path that was unsustainable. A path marked by excessive deficits, both in public accounts and in the current account. A path in which our debt to GDP ratio was ballooning, and in which household and corporate debt was at a level that was far from healthy. We accumulated a number of macroeconomic imbalances that ultimately threatened the solvency of the country if nothing was done. I could pick various indicators to illustrate these. For me, the most striking was the deficit of our current account. That was hovering at around minus 10% a year per year for more than 10 years. That meant that our external debt was actually accumulating at a pace of 10% of our GDP per year. In some countries, these policies of stimulating the economy through public expenditure, public works and high debt led to short-term growth, unsustainable growth, but growth nevertheless. But in Portugal, not even these happened. Within the Euro area, only Italy had the worst growth performance in the first decade of this center. Why was that? Economy historians will study these for the decades to come. For what is worse, my intuitive explanation as an engineer goes something like this. Participation in the Euro led to a sudden and precipitous fall in our interest rates, which gave little time for our economy to adapt. Thus, we had a severe and generalized misallocation of capital. As we well know, in some countries, these led to the housing bubbles. But not in Portugal. I somewhat provocatively say that in Portugal, we had a public expenditure bubble. According to a recent analysis by a Portuguese economist, Sarmento, public expenditure rose 131% between 1995 and 2009. These fast and dramatic increase naturally led to some much needed improvements in public services, namely in health and infrastructure. But ultimately, it generated a number of severe distortions in our economy. Easy public money perpetuated some long-standing biases towards protected and sheltered non-tradable sectors and encouraged rent-seeking activities. All these factors worked against the need for a competitive and dynamic economy. Low interest rates also led to a misallocation of credit to excessive household consumption and imports, thus to the already mentioned deep imbalance in our current account. Easy credit and a generous state masked structural fragilities in our economy and removed all incentives for reforms in labor and product markets. Unfortunately, governments shy away from much needed reforms when things seem to be going well, or even when they are just muddling through, and this is what happened in Portugal. The European debt crisis accelerated our rendezvous with reality, and so, in May 2011, Portugal signed up an adjustment program. The challenge was considerable, but the response has been effective. But so, what have we done to restore credibility and prepare for the past for recovery? We faced a tremendous task, but there was also an understanding that we also faced a once-in-a-lifetime generation opportunity to address these long-standing fragilities in our economy. The adjustment program we negotiated was founded on three major pillars, reducing our deficit, stabilizing our financial stector, and implementing structural reforms. So let me briefly comment on our main achievements in those three fronts. In 2010, the level of primary expenditure reached 48 percent of GDP. If we had the financing costs to these, we actually were basically giving from our production of wealth 50 percent to the state. In 2012, we were able to actually reduce this primary expenditure to 42 percent, barely 42 percent of GDP. There's basically 13.5 billion of differences in between these two numbers, and this level of reduction in just two years is unprecedented in Portugal's economy, sorry, and even in global terms. I'm sure only a few cases can compare. These data points shows clearly that there was an inflection in the path of expenditure growth. The weight of the state in the economy is at a more reasonable level today, though there is a lot of work to be done. As you may know, we recently had to revise our deficit targets, but this was not due to the expenditure side, where actually performance has been above expectations. It comes actually from a revision to our macro outlook, mainly due to weaker than anticipated European and global demand. This much is clear from the correction that we had in our primary structural balance of about 6 percentage points, sorry, in just two years. Secondly, let me tell you how the other main sources of imbalance in our economy, external debt, has been evolving. A critical aspect for our success is solving this issue in a sustained and durable manner. In the summer of 2011, the IMF officials that came to Portugal, they did projections that stated that we would be able to close this gap quite a bit, from minus 10 percent into a 10 of our current account to around minus 6 percent into a 12. But in fact, we closed the gap much further and faster, and it now stands at around minus 2 percent of GDP. This is actually a level that the IMF expected us to achieve only in 2016. So in two years, we adjusted what the IMF expected that we would do in six years. More importantly, this adjustment is driven not only from a reduction in internal conception, but also through an increase in exports. Recently, the Bank of Portugal announced that in 2012, the balance of goods and services was positive for the first time since 1952. We are thus demonstrating that within the constraints of the euro, and through a difficult but necessary internal evaluation, Portugal has been able to restore competitiveness, increase exports, raise the value added of products, diversify markets, and gain market share. Furthermore, the economy is deleveraging, and savings have increased. Our major banks are reducing their loan-to-deposit ratios and have been able to meet the most stringent capitalization requirements currently in place. We are also implementing a major privatization program. And with the first three successful transactions, we have already surpassed the objective for the full program. We have raised more than 6 billion euros, and Portugal is thus gradually regaining attractiveness for business and investment. Finally, we are engaged, as you are, in a comprehensive program of structural reforms to address a number of fragilities in our labor and product markets. Our ambition is to have Portugal as one of the most attractive business environments, and for that we have to lower down barriers. Let me give you a few examples. We have approved the new competition law. We have created a new court for competition. We are redesigning the whole structure of regulation in Portugal to be sure that we can have a level playing field for all companies. For many years, visible and invisible barriers curtailed the growth of our most innovative and agile companies. So we have created a new insolvency law already in force and proposed the revision of the civil procedure code, which is crucial in generating a more business-friendly legal environment. Our entrepreneurs and workers in general, when faced with a legal issue, had to face prolonged and costly legal battles. Under the services directive, we have already eliminated a number of excessive restrictions in the access to professions, and we are removing most licensing requirements. These are decisive steps in lowering barriers in our economy. We approved, in agreement with most social partners, major changes in our labor code, eliminating long-standing rigidities that protected a few for the detriment of the most. And we are reforming our product markets. Losing rents in sheltered sectors does benefiting dynamic agents for our society. These reforms are already creating a more open Portuguese economy, which is a precondition to kickstart growth and promote a resilient economy. But you know, we still have a long way to go. We are very worried about our level of unemployment, and we are implementing a number of short-term and more structural responses to this problem. We are also worried about the continued uncertainty in the Euro area. And more importantly, the Portuguese people are naturally frustrated by the constant sacrifices entailed by an adjustment program. Social and political consensus remain critical to the success of the program. As a government, we have to strive every day to build these consensus. But despite the challenges, no one can deny that Portugal backed away from the dangerous path it was threading just a little over a year ago. There was a clear inflection in all relevant indicators that had led Portugal into the crisis, and we are addressing these structural fragilities. So like Ireland, Portugal is threading a credible path towards restoring balanced public accounts and laying the groundwork for returning to strong and resilient growth. We are both in the right path. We are both on the only credible path. But we know from experience that this is a difficult path to thread. Our countries realized early on that despite the difficulties and uncertainty, there are no easy solutions. We simply cannot wish away deficits and debt. There are no shortcuts, no magic measures. And this leads me to my fourth and final point. Portugal and Ireland fell into a crisis coming from different roads. Each was unhappy in its own way. But both Ireland and Portugal are now very much on the same road to recovery. But if we think of Ireland and Portugal as case studies, what are the broader implications for the euro and its future? So let me give you my perspective. Historically speaking, the euro is one of the most ambitious collective projects ever carried out. At a time of crisis, when many of its design flaws are in evidence, it is easy to be cynic. But we must not forget the complexity and ambition of our collective undertaking. And we must not dwell on the mistakes alone whilst forgetting the many benefits brought about by the single currency. In all honesty, did we really expect that such a massive project would be flawless from the start? Hayek wrote once. The curious task of economists is to demonstrate to men how little they really know about what they imagine they can design. It was right. We always overestimate our capacity to design institutions. And then reality, through the iron law of unintended consequences, finds a way to humble us. So the fact that the design of the euro had flaws should not surprise us. Far more useful is to focus on what needs to be done to address these problems. What will ultimately determine the future of the euro? What will determine if the euro has a future? Is the way in which collectively we are able or unable to address those initial design problems? The future of the euro hangs on the willingness and ability of each country to accept and enforce the obligations of a single currency, namely the absolute need for sound public accounts and reforms to foster competitiveness. The founding fathers of the U.S. Constitution used to say that the new continent offered them the opportunity to begin the world anew, free from the crushing weight of the history experienced in the old war. At a time when we face a major existential crisis of the euro, perhaps we need to begin the euro anew. Despite all remaining challenges, despite the recent crisis in Cyprus, few can deny the bold and decisive steps taken in the recent months from the fiscal compact to the evolving role of ECB, and no one can deny that countries such as Ireland and Portugal have demonstrated that they are willing and able to take the necessary measures to meet its obligations within the euro. Portugal and Ireland, like other countries in the euro, both benefited and lost from the stresses and the weaknesses of the single currency. The change towards the new environment was sudden and mistakes were made. No doubt about that. But both countries are reacting the way they should, refusing to dwell on the past, and instead focusing on correcting early mistakes, on restoring equilibrium and credibility to public accounts, on removing the structural barriers for growth. So in a sense, if Portugal and Ireland are successful and our efforts bear fruits, then these will also be a success of the euro as a project. And to the contrary, if despite our efforts and sacrifices, our countries fail to emerge from the crisis in due time, or if the mechanisms of the European solidarity which have been in place suddenly fade to materialize, then these would not bode well for the future of this great collective project. To begin the euro anew, we will still require many sacrifices, some luck and a lot of wisdom. Mistakes will be made, but mistakes will hopefully be corrected in due time. Looking back, we know now that the early years of the euro were marked by a number of excesses, excess deficits leading to excessive debt, excessive rises in wages well above productivity, excessive lending and excessive price of debt. In a single currency, all those country-level excesses create costs to others. They generate what economists call negative externalities. And this means that strong, super-national rules to enforce moderation are both legitimate and compatible with democracy and sovereignty. In fact, freedom and autonomy are not only compatible with these rules of moderation. They actually require them. A great Irishman, Edmund Burke, told us exactly that centuries ago when he wrote, men must have a certain fund of natural moderation to qualify them for freedom. Else it become noxious to themselves and a perfect nuisance to everybody else. So ladies and gentlemen, thank you very much.