Press conference by President of the Government and Prime Minister of Portugal following Spain-Portugal Summit

Baiona (Pontevedra)

President of the Government.- Ladies and gentlemen, a very good afternoon to you.

I wanted to start this speech by conveying, in my own name and on behalf of the government, our condolences to the families of the three mountaineers who died a few hours ago in Kirgizstan: Alex Vicedo, Jos Cotrina and Pol Rodríguez. Their families can be sure of our affection, our endearment and our support.

Welcome once more to Spain, Pedro. All the members of your government accompanying you here today are most welcome at this wonderful Parador, in the beautiful town of Baiona. Welcome to Galicia and to Spain.

Allow me also to congratulate the Prime Minister of Portugal on celebrating his fourth anniversary at the head of the Portuguese Government yesterday. Whilst these have been tough years, they have been worthwhile because I am now fully confident that we have managed to put the main problems behind us, through a great deal of hard work, now a much better period is now starting for our citizens.

You will remember that last year we held the summit at another unrivalled location - in Vidago. This is the fourth bilateral summit that we have held in as many years. We have met the goal returning to hold these summits on an annual basis; evidence once again of the importance we attribute to relations between two of the oldest nations in Europe; two nations which, aside from geographic ties, feel more closely aligned than ever.

A few days ago was the thirtieth anniversary of our joint signing, on the same day, in Madrid and in Lisbon, of the Treaty of Accession to the then-European Communities. We both signed up to the European integration project, we both removed our physical borders by joining the Schengen area, we both promoted the cohesion policy which our respective societies have benefitted from, and together with our European partners, we founded our single currency.

Europe has given us a lot, it is true; but Portugal and Spain have also contributed a great deal to the European project and we have always done this side-by-side. European citizenship, the Mediterranean dimension and our special relations with Latin America are but a few examples. We have recently, together with the European institutions and with France, given a definitive push to the energy interconnections so that the Iberian Peninsula ceases to be an energy island.

And together we have stood up to the worst economic crisis suffered by our two societies, by Europe and by the integration project in decades. And we have done this, I sincerely believe, by setting an example of European solidarity, responsibility, reformism and moderation, and our citizens have also set an unrivalled example of hard work, solidarity and responsibility.

But, in short, let's not talk about the past but rather about the future. It is true that we have gone through some tough years but we must now concentrate on consolidating the recovery, in ensuring that we don't throw away what we have achieved through so much sacrifice and hard work, and proposing inspired projects for the future.

Now that we are finally on the path of growth and job creation and now that finally State resources are starting to grow, we are going to concentrate on strengthening and improving the pillars of the Welfare State which, by the way, is one of the hallmarks of the European project and something we have managed to hold on to from the ravages of the crisis.

In short, after a few tough years, we should look to the future with a certain confidence. We have shown Europe and the world that you can come out of the crisis through being serious, through hard work and with a long-term vision. And now, although there is still a lot to do in our two countries, we will also show what we are capable of achieving when the foundations are sound and the future is bright.

So, the Portuguese Prime Minister and I have spoken about future projects, about specific projects that will improve the well-being of our citizens. This is always easy with Portugal. Everything that is good for Portugal and for the Portuguese is also good for Spain and for the Spanish, and vice versa.

But, moreover, we are now facing a brighter future, with more resources for make available to our citizens and with specific projects that improve their well-being. In the Declaration adopted today and in the agreements signed, you can see plenty of evidence of that. So I will spare you from listening to a long list of what we have dealt with today.

Finally, we also tackled certain major issues on the international agenda. Once again, we have seen evidence of the close coordination and similarity of the positions held by Spain and Portugal.

As regards Libya, we agreed on the need to urgently find a political exit strategy, while supporting the mediation efforts being promoted by the Special Representative of the United Nations Secretary-General. The parties must take this opportunity to form a national unity government which is key for the future of the country and to more effectively tackle DAESH, which is trying to gain a foothold in Libyan territory.

We also tackled the migratory crisis unfolding in the Mediterranean. This is an issue of key importance both now and in the future. Spain and Portugal have external European Union borders, they are examples of integration, of solidarity and of cooperation with countries of origin and transit of illegal immigrants, an example of the right migratory policies which we offer to the European Union and which contain good methods for halting the serious crisis being suffered by some of our partners.

Jihadi terrorism represents the main threat facing the international community at this time. It threatens the security of our citizens and endangers our model of democratic co-existence. It knows no borders and recognises no religion, and takes advantage of the lack of sound institutions in many States. I have said this on many occasions, but allow me to repeat it again: this is not a religious war, but rather civilization versus barbarism. And we all have our goal perfectly clear: eradicating barbarism. We can count on our determination to fight against this and our intention to work together to achieve this, through the European Union and bilaterally with our partners by looking at all areas: security, border control, intercultural dialogue, shutting down sources of funding and avoiding the radicalisation of young people, without of course ever forgetting the victims and their families.

Spain and Portugal, aware of these threats and aware of the strategic space we share, have today signed a Cooperation Treaty on defence issues that updates the Protocol signed back in 1998. This treaty allows us to tackle these and other challenges together, it opens up new channels of dialogue in our defence policies and allows us to coordinate common positions on those international bodies we are members of. And, above all, it also allows us to move forward in a privileged Iberian relationship on issues of security and justice.

Ladies and gentlemen,

By way of example of this close Spanish-Portuguese cooperation, let me tell you that Prime Minister Passos and I will shortly travel to Brussels together to try to defend the wisdom, common sense, logic, reason and general interests of the citizens of Greece and indeed of all Europe.

We are going to try to reach an agreement on the bailout programme of the Greek economy. This is a very important meeting. I don't wish to jump the gun so will only say two things: if we don't reach an agreement this will be very bad for the people of Greece and, secondly, Spain has been and will be very supportive of Greece. But, on the same basis I can also tell you that on this issue, as on all issues, whilst dialogue is necessary so is following the rules and commitments made, in the same way as everyone else.

To close, allow me, since this is a bilateral meeting, but we are here in Galicia, to refer to the agreement adopted by Prime Minister Passos and myself to promote the Portuguese sections of the Camino de Santiago [St James' Way], which have been very important and well trodden in 2014. Hence, we are going to try to improve things in the future, offering greater possibilities, because we believe that it is good for our two countries and for all those who come here from anywhere else in the world to go on a journey that is undoubtedly of tremendous interest.

I also wanted to mention the Vigo-Porto railway line. Significant progress has been made; traffic has grown by 150% and the Portuguese Government will put the necessary works out to tender for the electrification of the stretch of line from Valença do Minho to Nine and the electricity sub-station in September. Spain has already executed, as you are aware, the Atlantic Corridor, which has been used to date by 427,000 people, coupled with the commitment now made by Portugal, the Atlantic Corridor could increase its benefits further in favour of all the citizens and this will be further boosted in the future.

Ladies and gentlemen,

Thank you very much for your attention. Mr Prime Minister, I will hand over to you.

Mr. Passos Coelho.- Thank you very much Mr President of the Spanish Government, dear Mariano. My thanks also to the ministers present here, as well as to the President of the Regional Government of Galicia - Alberto Núñez Feijóo - and also to those business leaders present here in representation of their respective business associations from Portugal and Spain.

I would like to begin by thanking the President of the Spanish Government for inviting me here to Galicia, which is his native region and is also very close to mine, to hold this 28^th Spain-Portugal Summit.

And I would also like to stress, in the presence of the President of the Government, the much hailed first anniversary of the coronation of King Felipe VI.

Today's summit has a particularly symbolic nature, firstly, in that the month of June this year is the 30^th anniversary of the accession of Portugal and Spain to the then-European Economic Communities. Our participation in the European project constituted a fundamental aspect in the process of political transition of our two countries, incorporating the internal changes made in an area of liberty and democracy. The European vocation of our societies is still marked by the way in which democracy and Europe go hand-in-hand in both our countries. Our citizens found how to take advantage of their participation in the European Union to make our societies more modern, more open and more cosmopolitan. And it was this same decision that also took us to the European Union by defending a cohesion project open to the world and with opportunities for everyone.

Secondly, this summit concludes a period of renewed closeness between our two countries, having held four summits in our respective terms of office of our two governments that were facing similar challenges. Our democratic transitions and accession to the European Communities brought our two peoples closer together and established new ties in economic and political relations between our two countries.

Today we naturally assume the relationship as partners between Portugal and Spain without any complexes, although we should remember that for a long time that was not the case, which serves to even further highlight that relations between Portugal and Spain have started to act as a mirror of what the European project is in terms of an area for cooperation and for enhancing integration to the benefit of our citizens.

Today we are irreplaceable trading partners for both of our countries; our economies are closely integrated; our companies invest on both sides of the border; we receive a great number of citizens from the other country, whether to study, work or simply visit; we learn the language of the other country, and we enjoy very close cooperation in responding to the challenges of international security.

In fact, bilateral trade relations have reached their highest ever level in 2014, exceeding, for the first time, 30 billion euros, and this trend has been extended into the first four months of 2015, with growth well in excess of 10%.

We have found ways to take great advantage of this constructive and positive integration in our bilateral relations on the European stage. For example, what we recently made progress on the internal energy market and in developing interconnections with the rest of Europe, as the President of the Spanish Government mentioned, which is a reflection of the way we have managed to align the interests of our two countries with the interests of the European Union and thus foster policies and changes which not only benefit everyone, but particularly our respective citizens.

As I mentioned, these four years have been years of challenges for our two countries. As from 2010, the European Union, and Portugal, in particular, faced an unprecedented economic crisis, both in terms of the dimension of the crisis itself, and in terms of choosing the policies that each country had at its disposal to respond to the crisis. That is why European countries, above all countries like Portugal, but also Spain, have embarked on difficult reform processes with social repercussions, with the aim of establishing the right conditions to successfully grow in Europe.

What we have done over the last four years in Portugal, and if you allow me, Mr President of the Government, I believe that also in Spain, has enabled us to place our economies on a healthy and sustainable path. That has led us to face the future with optimism and renewed confidence. We know that we are now facing a very different situation to that which we found ourselves in back in 2012 at the first summit we held between our two governments, and we also acknowledge that the weight of the imbalances accumulated over the course of the years as a result of national policies, aggravated by an incomplete structure of the Euro, which further reinforced the need for national policies to be even better. But that was not the case and we now find ourselves with very high costs, above all in terms of unemployment and the risks of public and private debt, and an increase in economic divergence and political fragmentation, calling into question the very goals of the European project.

That is why, based on the national efforts that have been made to date, we defend the fact that now is the time for the European Union to complete the partial responses it has made since 2010, given to 19 [Eurozone] or 28[EU] countries, and which sought, above all, to stabilise the crisis situation. Now, and more so in a context of the emergence of new risks, that are more isolated but no less important, is the time to unite our national responsibilities with the common responsibility, and adopt European institutions and policies that foster growth, job creation and help make us, individually and jointly, more competitive within the global economy and more shock resistant.

Making progress now on firming up the areas established in terms of Banking and Financial Union, in coordinating national structural policies and in starting to take new steps towards greater convergence between countries will constitute a major commitment to the future of our single currency that will translate into a significant political and economic impact.

Portugal and Spain share this ambition, aware that better and greater European integration is beneficial to both countries, and constitutes one of the demands from our citizens. We want to face the future together, with the knowledge that the path we tread and the results we achieve consolidate our goals and our position in the alignment of European nations.

Finally, I would like to highlight because, above all, this is a bilateral summit, that almost all the areas of government have been present here at today's summit which has allowed us to consolidate four years of very close relations between the members of the governments of the two countries. I would particularly underline the signing of agreements on defence, health, tourism, employment and transport issues. These are areas of very intense cooperation at a bilateral level and, in the majority of cases, with a great impact at a cross-border level. They represent a shared vision of our main concerns in matters of international security and, above all, of our closest neighbour.

In this regard, I wanted to end with a few words of recognition for the excellent collaboration between Spain and Portugal in the training of the Iraqi military, through their joint participation in the efforts of the international coalition against terrorism.

I hope, Mr President of the Government, that in the coming years, and because I vouch that this is going to be the will of our citizens, we will have the pleasure of continuing to strengthen our already wonderful relationship to the furtherance of the mutual interests of our two countries.

I also wanted to close by adding my condolences, which I also convey to the Spanish Government, on the death of the three Spaniards in Kirgizstan, who I believe deserve, on the part of both governments, not only our respect, as is obvious, but also our condolences to their families.

Q.- I would like to ask what signs or what information is coming out of Brussels at this time and I would also like to know what position you will adopt at this extraordinary summit.

Mr. Passos Coelho.- I will answer first. Firstly, I don't wish to make any comment on proposals of which I am unaware. I know that at this time there are evaluations being carried out on the part of the Troika institutions, that is, the European Commission, the European Central Bank and the International Monetary Fund, regarding which the Greek Government has sent its last proposal this morning. At any event, I know that there will also be a meeting of the Eurogroup at which the Finance Ministers will look at the evaluation made by the institutions and, in this regard, a decision may be taken on the proposal presented or certain recommendations may be made which the Summit of the Heads of State and Government may take into account. But I believe that it is still too early to make any comments on this in the sense that the Eurogroup has still not received its own evaluation from the institutions.

I don't want to go further than what President of the Government Rajoy, said, which is the same as we have been saying for these last four months, or indeed the same as we have been saying since the fifth assessment of the second programme, which was suspended in August last year.

We hope that it will be possible to find a solution that works for Greece and that works for the Eurozone. We are aware that there is a series of commitments already taken on by Greece, and that it has been clearly difficult to meet these commitments. The institutions have allowed a certain amount of leeway in order to reach a new agreement, but any new agreement must respect the will of the Greek Government whilst also respecting the rules that govern all Eurozone governments, and our governments as well.

From the information I have available, it would seem that no impediment exists on the part of any Eurozone government to reaching a new agreement, but I would equally say that these last four months have not led to a new position of understanding and I believe that it is wholly premature to announce any new position regarding the summit that is due to take place this afternoon.

President of the Government.- I would like to make a couple of comments in relation to the situation Greece is going through and the events we are living through at this time, and I would announce that these comments coincide with those that we have just heard from the Portuguese Prime Minister. But I would like to point out a couple of additional things.

Firstly, the delay in these negotiations is prejudicial, above all for the people of Greece and for the Greek economy. Last year, the forecast for growth of the Greek economy stood a little above 3% for 2015; the latest forecast for growth made by the European Commission is 0.5%. I repeat from more than 3% to 0.5%. Furthermore, there is another fact that is important: Greece has returned to negative growth in the first quarter of this year. Hence, this is extremely harmful, in the first place, for the people of Greece; this is affecting the revenues collected by the Greek tax authorities and it is also affecting unemployment, and hence the standard of living.

Secondly, as far as I am aware, all the governments of all the Eurozone countries are and wish to be supportive of Greece, and we indeed are supportive. Europe has lent Greece almost 100% of its Gross Domestic Product, which is exactly the same as if Spain had been lent 900 billion euros by the other European countries. The principal on these loans will start to be paid at 30 years and interest at 10 years.

Hence, Europe has been supportive, and wishes to continue to be so, of Greece. And we would all like to see an agreement, and for this to take place as soon as possible. But it is also very important for the Greek Government to be aware of the efforts being made by the citizens of the rest of the countries in the European Union and to be aware that it is positive - I would say essential - for a political operation as important as this process of European integration - probably the most important operation to ever take place on our continent - to prosper, and to do this it is necessary for everyone to abide by the rules and meet their commitments.

That is what I understand and what I know, from what they have told me, regarding what all the Eurozone countries want, and on this issue we are all united and in agreement.

As regards where things stand at this moment, I explained this to the Prime Minister of Portugal. It seems that Greece has sent a new proposal. The Eurogroup, which is meeting at this time, was unaware of this until 10 minutes ago, because I have just spoken with the Spanish Minister for Economic Affairs. The only thing we do know at this time is that the ECB, the European Commission and the International Monetary Fund have all said that as yet they don't have enough information and that they need more time to look at the content of this proposal.

Hence, that is the situation at this time. Perhaps things have now changed or will change in five minutes time, but for the moment that is where we stand.

Now, for my part, I can tell you that I am going to go to this meeting with a constructive spirit and that, sometimes, some people should be aware that if you overstep the mark, you can end up prejudicing your own country. At this time, economic growth in Greece is unfortunately, and I am sorry and we are all very sorry, going to be worse than the forecasts back when they were meeting the commitments that this country had taken on with its partners.

Q.- I wanted to ask both leaders a question. You talk about following the rules, about solidarity, as well, but about following the rules in the case of Greece. Do you fear that Europe could be more flexible than it was with Spain and Portugal? Do you fear a knock-on effect that may generate a lack of confidence and that may prejudice the recovery of the two countries?

I have two questions for the Spanish President of the Government related to domestic policies. You spoke about changes in the government. Do you still maintain that these changes will take place? Can we expect a cabinet reshuffle, albeit a minor one? And now that we are here, will the President of the Regional Government of Galicia, Alberto Núñez Feijóo, be part of any reshuffle?

Finally, Pedro Sánchez announced his candidature for Moncloa Palace and he appeared yesterday in front of a huge Spanish flag. You have claimed that the PSOE [Spanish Socialist Workers' Party] - and the People's Party (PP) has done this too - stands on the radical left. Do you view this gesture in a good light and do you believe that it may denote a change in attitude that could facilitate an approximation between the PP and the PSOE?

President of the Government.- You are lucky that I have a good memory because if that were not the case, it would be impossible for me to respond, one by one, to the endless stream of questions that you are asking me.

I, at least - the Portuguese Prime Minister will have his own criteria, as you would expect - the only thing I want, what I believe is good for Spain, but not only for Spain and for the Spanish people but also for the whole of Europe, is to see an agreement and for an understanding to be reached.

Spain had to make a great effort, but Spain was never in the same situation as the Greek Government. We implemented a policy that we felt was good for Spain and for the Spanish people. We do not believe that it is good to have a high public deficit. I remember that when we came to power it stood at 9%, and nobody can live with a 9% public deficit, whatever Europe or anyone else may say. Quite simply, you can't live like that because that would have forced us to ask for 90 billion euros to cover the budget each year.

I believe that it was good for us to undertake structural reforms, as we did. And, in the end, although there are still many things to do in Spain and the effects and the side-effects of the crisis still exist today, what is true is that this year Spain will grow by more than 3% and 600,000 Spaniards will find a job. The months of April and May have been wonderful, because almost 400,000 more Spaniards were once again affiliated to the Social Security system.

I believe that this had a positive effect and I believe that the challenge facing Greece is exactly the same as for Portugal, for Spain and for every other country. What is needed is economic growth and job creation in order not to always have to depend on others. So, I will be very constructive there.

You asked about the knock-on effect, that was your second question. It is not good to jump ahead of the game. I hope that this can be settled through an agreement that leads to normality, that generates stability and certainty, and where we can honestly say that people in the European Union are serious.

So, having said that, we are not back in 2012. 2012 was a dramatic situation and both Portugal and Spain went through this. You will remember the level the risk premium stood at, you will remember that in our country there were many public institutions that could not find funding, and that was why we needed to create the Regional Liquidity Fund; and you will remember the Supplier Payment Plan. That has all changed. However, I would stress now that the side-effects of the crisis still exist, but we are heading in the right direction and we are on the path to recovery. Hence, I have no fears as regards the possibility of a knock-on effect.

The third issue. As I have already said on other occasions, when there are only a few months to go to elections, there will be no…, what is understood to be a crisis. Alberto Núñez Feijóo - you have brought his name up - he has already expressed his desire, and I agree with him, in that he is here, elected by the people of Galicia to carry out a government program and he has already announced his intentions to the people.

But, I repeat, we are not going to change policies now, when there are only a few months to go and, above all, when our economic policy is starting to lead to positive results in our country.

Finally, you asked me about the flag. I think that the use of the Spanish flag, which is the flag of all Spaniards, is good whenever and wherever it is displayed. I use it, in fact, at all the public events of my party, the People's Party, and we are using it here today, as you will have seen. I use it with all normality and I use it in a natural way, and I do so because it is my flag, it is the flag of my country and it is the flag that induces feelings in me and that I love. Hence, I agree with that.

Now, one thing is using the national flag and another thing is that Spanish society forgets that the People's Party won the elections in a great many Spanish municipalities and that Mr Sánchez, with the sole aim being that the People's Party, which won the elections, does not govern, has given his support to populist, extremist, radical, and in some cases, pro-independence groups. In order for the People's Party not to govern in Badalona, he gave his support to the CUP [Popular Unity Candidates], which is a radical, extremist and pro-independence party. And thanks to Mr Sánchez, who has decided not to respect the will of the people, local councils such as - just to quote a few councils that are familiar with you - Madrid, Valencia, Zaragoza, Cadiz, La Coruña and many others are being governed by candidates from Podemos, when it was the People's Party that won the elections in these places.

Hence, this leads to extremism, to radicalism and to positions that are obviously in contrast, at least in my opinion, to the way the world is heading in the 21^st Century, and I don't like that at all. We are going to remain committed to moderation, balance, common sense, upholding the law and generating stability and certainty.

Mr. Passos Coelho.- I also want to answer the question on the issue of Greece that was raised, and I am in complete agreement with what the President of the Spanish Government said.

I do not believe the risks of a financial nature which are associated with non-compliance by Greece can be treated the same as those we collectively faced back in 2010, when it was necessary to make bilateral loans available and then create a mechanism which would allow - together with support from the International Monetary Fund - a response to stabilise the financial markets. Fortunately, Europe is not in the same position as we found ourselves in back in 2010.

We have still not completed the economic and monetary architecture of the European space. For this reason, the debate that we should embark upon, and I hope that we can initiate this at the European Council at the end of this week, will seek to find a raft of responses that will enable us to conclude and complete this institutional construction of the Economic and Monetary Union. But it is clear that the instruments available to us today will allow us to manage financial crises more effectively than back in 2010.

Secondly, it is important to say that many people have done their homework over these last few years and I am talking about Ireland, Portugal and Spain. Some with financial assistance programmes and others solely with aid to the banks, we made a series of transformations that it was possible to do with the support of our European partners, but, above all, because we had to obey a principle of national responsibility. And I believe that this national responsibility is, to some extent, what has lead to Europe being in a better situation now.

If things hadn't turned out well in Ireland and in Portugal, and if the economy had not undergone a major volte-face, as it did in Spain - although this had a very high political cost - the truth is that today we would be discussing the risks deriving from any eventual breach by Greece with much greater concern. But fortunately, as I said, we united European instruments with the realisation of the principle of national responsibility and that has led to Europe being able to manage this situation in another way.

Hence, there is no type of financial contagion equivalent to that back in 2010. There may exist some form of contagion of a political nature and this contagion may exist to the extent that, if one country decides to remain in the Euro or not according to their assessments of a national nature, then in this case the uncertainty surrounding the future of the Economic and Monetary Union could undermine the confidence we need in order to be able to proceed with the European project. This political contagion must be calculated and, to do that, we need, whatever happens, to find responses that allow us to complete the institutional framework of the Economic and Monetary Union to help make it immune to this type of political contagion that is not financial.

I also want to say that the European Union, and in particular the Eurozone, has shown a great deal of flexibility in dealing with the issue of Greece. I do not believe that we can say that Greece has been an isolated and unique case; it has not only affected the persistence of the problem and a worsening of the problem, particularly lately, but it has also affected the search for solutions that have not been offered to anyone else over these last few years.

For example, in Portugal we are paying interest - a levy - on the loans we took out. We must repay this debt as from 2025 on the European loans and we are now even settling early the payments we had to make to the International Monetary Fund. Greece, as you know, does not have this problem; it is not under this pressure. It has bilateral loans that were lent under the first programme and Greece benefits from an extension to the interest payment term, and even to repay the loans, that is longer than for other countries. And, moreover, it has an agreement from all the countries in the Eurozone to return any profits that may have been made from transactions in relation to the Greek debt from our central banks.

This means, hence, that the idea that exists that the situation may be prejudicial for Greece, and that we will benefit from this, is false, because all the interest terms are not only favourable to Greece but any gains that may be made from holding Greek debt must be returned to Greece. No other country has benefitted from such a condition. Portugal, for example, as well as Spain, saw how the European Central Bank in 2010 and 2011 bought up Portuguese and Spanish public debt on the secondary market when no-one else would buy it, and both Portugal and Spain have been repaying this public debt that was bought up on the secondary markets by the European Central Bank that it sought to sell. We have paid for this debt and the ECB has not returned any gains that may have been made as a result of these financial transactions.

There has thus been a great deal of flexibility in dealing with the issue of Greece, so much so that there has even been a re-structuring of the debt, which was not done with any other country.

I thus believe that the problem here is not only a question of flexibility. We, as a body, accepted granting an extension to Greece, which will finish at the end of this month, in order for an agreement to be reached. At this time, it is very important for no additional extension to be granted without clear guarantees that, if we grant this extension in order to reach an agreement, this is not used in order to prolong an uncertainty that is not positive for Greece or for any other country in the Eurozone.

Q.- I have two questions, the first in relation to Greece, and the other in relation to the European Union.

The question on Greece is related to the statement made by the Finance Minister this weekend, which urged Germany and the German Government to say whether it was on the side of a supportive Europe or on the side of an austere Europe. I would like the Portuguese Prime Minister to say whether this dichotomy between two Europes makes sense when taking important decisions.

My second question. The Prime Minister has spoken various times here, and extensively, on a structural reform of the Eurozone and also of the Economic and Monetary Union, to tackle such a crisis as this, even ignoring the devastating effects that this would have on unemployment and on debt. I would like to know both your positions on this and what you specifically propose.

Mr. Passos Coelho.- If President of the Government Rajoy will allow me, I would like to briefly respond to the two questions, firstly to say that I can make no comment about the statement made by the Greek Finance Minister, and, as I have already had the opportunity to say, I believe that it is due to a lack of solidarity whereby it has unfortunately not been possible, to date, to find a solution for Greece. I hope that this solution can be found and I hope that solidarity can be maintained, as it has been to date, but I also hope that all the rules, which are the rules that we must all follow, all democracies - the 19 democracies in the Eurozone must follow these rules - can indeed be followed.

As regards the issue of the reform of the Economic and Monetary Union, the contributions made by both the Portuguese Government and the Spanish Government to the discussion that will take place at this European Council are well-known. We know that yesterday the project containing the Five Presidents' Report was published - the President of the European Parliament is now also associated with this report - to extend the Economic and Monetary Union. We are still analysing this document and it seems to me, to a certain extent, in a quick first reading that I made, that this falls a little short of the needs we have at present, above all if we are talking about the situation of Greece. But these are certainly important steps towards reaching what I would call a qualitative reform of the Economic and Monetary Union.

In 2010, we found ourselves with some important instruments that had not previously existed and which, to a certain degree, were acknowledged failings in the architecture of the Eurozone. We did not have a European Semester operating as it does today which could therefore have ensured mutual monitoring, as well as the involvement of the European Commission in providing this monitoring and this coordination of the efforts at macro-economic, and more importantly, budgetary policy. We have a budgetary treaty that introduces very important new rules to help prevent any future imbalances, and we have already created a European Stability Mechanism which, to a certain extent, has set up the two funds that have been used to help those countries in the greatest difficulties.

We should also remember that a major part of these solutions are provisional to a certain extent; in other words, they are still not integrated into the architecture of the Euro and we now need to take them on on a preliminary basis, thus emphasising what is European responsibility. That is a fundamental point. We will not manage to resist future crises if not every country does what it has to do in its own backyard, in its own country. The principle of national responsibility is a priority in the process of European construction.

But, once those countries that are members of the Eurozone are deprived of other economic and financial instruments because they share the same currency, if they are unable to benefit from a principle of shared responsibility, of European responsibility, then any problem that may arise in the future, together with the legacy that we presently share from the past, will only be resolved through efforts that end up in economic divergence within the Eurozone and not in an attempt at convergence.

That is why the Portuguese Government has striven to truly create a Banking Union that works faster than had been foreseen and with a special emphasis on stability, on guaranteeing deposits, which still does not exist. We also need to have a genuine Financial Union - not only Banking Union but also Financial. And this all involves a series of policies from an economic point of view, which has still not even been brought to the table, but which certainly needs to be.

We would highlight the importance of a European insolvency mechanism that makes financial fragmentation more difficult and which, hence, would place our small- and medium-sized enterprises in a better position to compete with companies from other countries, but we also need to transform and institutionalise what, for the time being, is only an inter-governmental treaty, as is, for example, the European Stability Mechanism and the Budget Treaty. We need to make this our daily goal, and for that reason, I personally, as the Prime Minister, defended the creation of a European monetary fund to resolve the problem of the Troika, on the one hand, and on the other provide the Eurogroup with instruments for economic coordination and for the enforcement of European Semesters that allow us to form response policies that are more robust in the medium and long term.

President of the Government.- As regards the second question - I will not say anything in response to the first question either - yesterday, as the Portuguese Prime Minister reminded us in his speech, we were given a copy of the Five Presidents' Report. It is a document that really does contain a good portion of the proposals we made some time back. I am not going to give you a speech now, but I would like to say that Europe has been built little-by-little: since the 1957 Treaty of Rome, certain things have taken place, and even before that, with the European Coal and Steel Communities. But I believe that at this time we are ready to take a more definitive step in the integration process.

I should say that in recent years many things have been done; I have been at the head of the Government of Spain since the end of 2011 and we have, since then, signed the Fiscal Treaty, I have seen the birth of Banking Union and we have seen important steps taken towards Economic Union.

The steps which, in the opinion of the Spanish Government, must be taken in the future are the following: firstly, step up Economic Union, with particular attention on energy union, digital union and financial services union.

Secondly, in addition to Economic Union, Fiscal Union. I believe that, after having achieved Banking Union, Fiscal Union should also be tackled. I know that this will take time but, clearly, since this is precisely something that takes time, we should start to talk about it soon.

Finally, I believe that we must also make an effort to push forward with Political Union. This is probably the greatest and most difficult challenge, but without any doubt, it is the final goal line that the European Union must reach.

Q.- Mr President of the Government, I would ask for your help in trying to explain to the public what the adjustments to the government consist of: whether they will affect ministerial portfolios or not, whether this affects coordination… So that we can then explain this appropriately to the public.

I would also like to ask you whether you can confirm if the government is studying any possible reduction in VAT and whether this is one of the things that you plan to announce to us.

And as regards Catalonia, are you more worried today than yesterday about the situation of the autonomous region, taking into account the break-up of CiU [Convergence and Union]?

President of the Government.- In regard to your first question, I am not going to add anything to that which I have already said, it simply makes no sense. When there is news, or indeed if there is news, you will be duly informed.

As regards your second question, you mentioned possible tax reductions. No decision has been taken for the time being about any possible reduction in taxes. There is already a tax reduction that is under way at present, affecting both Personal Income Tax and Corporate Income Tax, and in 2016, both of these taxes will also enjoy another reduction, something approved through legislation that was presented to Parliament.

As regards the third issue - Catalonia - there has indeed been a break-up of Convergència i Unió (CiU); in other words, 37 years after the creation of a coalition, it has broken up. In all honesty, all policies based on extremism, all policies that incite division, end up with this scenario. A great divide has sprung up in Catalan society, and this great divide has even affected the very party that promoted it.

I, quite simply, should say that elections have been announced; these elections are solely and exclusively regional elections, which will solely and exclusively lead to the election of a regional parliament and the Government of Spain, because it is its obligation and because this has been requested by the Lower House of Parliament and by the people of Spain, will ensure that the law is upheld. But, of course, the Government of Spain cannot accept, in any way whatsoever, that national sovereignty, equality among Spanish citizens, or the fundamental rights and liberties of all the people of Spain will be put in jeopardy.

That is the position I have maintained for a long time now, and that is the position I will always continue to maintain, as President of the Government, and when I cease to hold that position, as a Spanish citizen and an individual: the defence of national sovereignty and the assertion that what Spain should be must be decided by all the people of Spain together.

Thank you all very much and a good afternoon to you.