over time ; and 3 ) determination in fulfilling our obligations ( e. g. willingness to pay ). in this regard, the message coming out of the country is very important. public debt interest rates are currently inviting and, when public financing sustainability becomes credible, there will certainly be investors interested in portuguese public debt and, as a result, we will see the spreads versus our european partners fall, as was the case in ireland. 2. medium - term challenges for the portuguese economy where do we want to go? portugal faces two tough medium - term challenges : sustaining economic growth absorbing the high level of structural unemployment i distinguish between these two challenges because economic growth may be based on productivity increases, thereby coexisting with continuing high structural unemployment levels. from my point of view, this is not a good equilibrium. structural unemployment has personal and social costs that go far beyond lack of income, creating a corrosive effect on social cohesion. so we need to sustain growth in increased productivity and employment. bis central bankers ’ speeches indeed, sustained growth achieves four goals at the same time : ( i ) public debt sustainability ( ii ) external debt sustainability ( iii ) increased per capita income level ( iv ) increased employment the reallocation of human resources between the non - tradable sector and the tradable sector is going to take time, requiring mechanisms to be strengthened or created to mitigate the effects of this adjustment on social cohesion. the process will be slower the less clear or more misaligned the incentives are from economic and social policy. it is up to society as a whole to establish or strengthen cohesion mechanisms that ease the effects of unemployment, namely the risk of social exclusion through lack of income. furthermore, it is necessary to create support mechanisms to re - skill the long - term unemployed, to prevent them from passing into inactivity, through obsolescence of the knowledge acquired previously. preferably, re - skilling and the acquisition of new skills takes place within companies. from the viewpoint of social cohesion, it is key to safeguard two aspects : firstly people must not be condemned to remain outside the labour market ; and secondly the mechanisms for re - skilling workers must be efficient and the employment created is not artificial but economically sustainable. similarly, a balance must be struck between the income support mechanisms and the stimulus for returning to the labour market. in other words, the income support mechanisms cannot disincentivise the recipient from returning to the labour market

conference cycle, “ thinking portugal : what macroeconomic policy should follow the programme? ”. intervencao do governador carlos da silva costa na conferencia “ consensus e reforma institucional ” address by governor carlos da silva costa at the “ consensus and institutional reform ” conference ( portuguese version only ). bis central bankers ’ speeches domestic payments were it not for the assistance of international institutions. we have embarked on an adjustment process through a contractual relationship with those who came to our assistance. at corporate level, this situation is analogous to what happens when a company falls into difficulties and has to negotiate a restructuring plan with the bank. there are conditions and targets to fulfil that form part of the relationship of trust between the party supplying the financial assistance and the party receiving it. we are making an adjustment under very different conditions from those in force in previous financial assistance programmes, in 1977 and 1983, both in terms of the institutional framework of macroeconomic policy and in terms of the productive and financial structures. but the greatest difference arises from the starting point, which is far more unfavourable in the recent case. aside from this, the external imbalance adjusted in line with that observed in previous programmes ( figure 1 ). this development is notable, as it took place without recourse to the nominal devaluation of the exchange rate and with fairly low growth in external demand. although exports did not grow as much as in previous adjustment episodes, they increased market shares. i emphasise here the effort made by portuguese companies in the tradable sector ( including tourism ) in incremental penetration in the markets and in redirecting supply to new markets. in addition, the performance of the effective real exchange rate shows that even in the absence of a nominal exchange rate devaluation, the portuguese economy has shown the flexibility needed to adjust through variation of the relative unit labour costs. this is an important accomplishment for europe as a whole, as it proves that it is possible to make an adjustment in a single currency context. figure 1 comparison with previous financial assistance programmes : external accounts trend effective real exchange rate current and capital account balance ( % of gdp ) ( using ulc ) t - 1 t t + 1 t + 2 - 5 - 10 - 15 t - 1 exports market share t t + 1 t + 2 external demand t - 1 t t + 1 t + 2 t - 1 t t + 1 t + 2 notes : t corresponds to the start year