"Awareness of the truth is the first step towards action. The President called a spade a spade to impress upon the people the seriousness of the situation," Presidential Spokesman Ignacio Bunye said in a statement.
"Telling the people the truth was intended to instill greater responsibility for these obligations, not to signal default, which will never happen," he added.
The Philippines defaulted on its foreign obligations in 1983 during the Ferdinand Marcos dictatorship, ushering in a decade of economic difficulties and political turmoil. Marcos was ousted in 1986.
Mrs. Arroyo, a Georgetown-trained economist, said Monday in a statement: "We are already in the midst of a fiscal crisis and we have to face it squarely."
The President’s comments came after a group of Filipino economists warned that the country could face a financial meltdown in three years similar to Argentina’s, which defaulted on its public debt in 2001 because of its ballooning deficit and staggering amount of debt.
As Bunye sought to allay the fears and concerns aired by various groups, he said the President "does not need any emergency powers because existing laws already give our president enough powers to deal with this problem."
"All we can say is if we do not act now, if we have zero action now, we would feel this problem in three to four years," he warned.
Bunye, speaking over the government-run Radyo ng Bayan yesterday, said what is important regarding the President’s statement is that it "is a wake-up call so that we won’t be complacent or misdirect our attention to what ought to be our top priority."
"We have been seeing that there are too many issues being talked about that do not address our fiscal crisis. So perhaps, it is a call for focus on what is really our No. 1 problem," he said.
Socio-economic Planning Secretary Romulo Neri concurred with Bunye in rejecting any need for Congress to grant emergency powers to the President to address the looming crisis.
"It is like the money problems that beset a family when the President, as the mother of a nation, would ask each member of the family to do their share and chip in to improve finances of the family, to pay for all its obligations and to meet the needs of everyone," he said.
"I think, in the end, the financial sector would be more appreciative because they know we are serious in addressing our problem," he said.
Manila stocks tumbled more than two percent to a one-month low yesterday and the peso eased 0.3 percent against the dollar to 55.935, its lowest since early August.
Philippine sovereign bonds held steady, but the coupon rate on a new offering of four-year bonds jumped to 11.75 percent from 11.0 percent as local banks demanded a higher premium in the wake of the President’s statement.
Bunye noted that Mrs. Arroyo’s wake-up call on the looming crisis has generated the desired response from leaders of various sectors, local government officials, and lawmakers from both camps, who called for possible measures to address the problem.
"If we need to save and all of us would sacrifice, the executive department would lead. I guess that is the message of the President, all of us would help down the line," he said.
Bunye said the executive department will set an example by submitting a reduced proposed budget for 2005 to Congress tomorrow.
He said the President will soon issue directives to implement "cost-cutting" measures in all government agencies, including government-owned and controlled corporations.
Offhand, Bunye also welcomed suggestions made by some lawmakers for them to cut down congressional development funds or "pork barrel" allocations in the annual budget.
Some congressmen aired their support for Mrs. Arroyo’s proposal to implement austerity measures. Others called on Mrs. Arroyo to exercise political will in addressing the fiscal crisis.
Cavite Rep. Gilbert Remulla said the crisis will only be averted if the President exercises political will not only by asking Congress to pass new tax measures but also by running after big tax evaders and corrupt government officials. — With Paolo Romero, Arnell Ozaeta, AFP