'Debt at 123% is not viable. Let's not be foolish'
FORMER Portuguese government minister and MEP, Carlos Pimenta, knows the euro story both from the Lisbon and Brussels perspective — and now as a businessman, he knows the austerity reality too.
As one of the 500 MEPs who voted for the creation of the euro in the European Parliament, he believed there would be a political union also.
“If I had known that the constitution being designed to deliver political union was going to be rejected, I would have voted against the euro,” he said.
But now he is stuck with the result of the half-baked currency in a country whose growth has stalled and unemployment soared, raising funds for an enterprise that ticks all the boxes, but which is handicapped because it is Portuguese.
He helped found Novenergia, a company involved in renewable energy projects which has now expanded into a number of countries. In Portugal, it is big in the wind power industry and he is currently raising €2bn to further develop its potential.
The company is producing the cheapest renewable energy in the EU but has not been able to borrow from a commercial bank since 2008. He has raised 80% of the money from foundations and shareholders, which is increasingly difficult.
“We are making local industry more competitive by producing cheaper power, we are replacing expensive imports of energy, we are creating jobs and making an investment that will last for 35 years.”
But to do this, he has had to operate in a time warp.
“We are going back to a time more than 700 years ago when there were no banks, when the first one had not yet been established in Sienna, trying to raise money from ordinary people. How can you reverse unemployment like that?” he asks.
If he was working in Germany, he would be able to borrow the money at an interest rate of 2.5%. But in Portugal he cannot get any money.
“It is not possible to get any money for projects in this country or in Ireland or the other countries that need growth so much.”
There is a solution, he believes. “The debt at 123% is not viable, full stop. Let’s not be foolish.
“We need to readjust the calendar which is more elegant than a haircut, OK, we will pay back 100% but over 30 years.”
As the country’s growth contracts — last year by around 4% alone — the size of the debt in relation to GDP grows and the tax take reduces while social benefit pay outs increases, and there is no help from the EU.
It is in contrast to the US; when California was bankrupt the benefits to help the unemployed came from Washington and prevented the collapse of the internal market — and this will be repeated in Detroit now too, preventing the negative effects from draining the local economy.
“This is what is needed in the EU for the euro — a treasury and a federal budget, not the 1% of EU GDP as it is now,” he says.
But in the meantime he has to hope that Novenergia can survive until the lessons are learnt and put into practice.
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