Aid to banks increases Portuguese public debt by 23.7 billion euros

4 April 2018

Public interventions to bail out the Portuguese financial system between 2007 and 2017 had an impact of 23.7 billion euros in public debt, Portuguese newspaper Jornal de Notícias reported citing figures released by the Bank of Portugal.

Most of this amount is related to capital injections, in the case of Caixa Geral de Depósitos (CGD) in 2017, Banco Internacional do Funchal (Banif) in 2015, the capitalisation of Novo Banco in 2014 (following the resolution of Banco Espírito Santo) and even in public companies that were left with “toxic” assets of the former BPN bank (nationalised in 2008).

Other expenses refer to charges such as “other capital transfers” (including 1.8 billion in 2010), payment of interest or the execution of state guarantees, including 450 million euros related to Banco Privado Português, which has since gone into iquidation.

The Bank of Portugal also reported that government measures to support the financial system between 2007 and 2017 had a cumulative impact of 9.1% of GDP on the budget deficit and 12.3% of GDP in public debt.

The central bank also said that the impact of support on the 2017 deficit was around 4.5 billion euros (2.4% of GDP), mainly through the capitalisation of Caixa Geral de Depósitos.

Daily newspaper Diário de Notícias had previously indicated that the total taxpayer bill related to the stabilisation of the financial system amounted to 17.1 billion euros in the last decade, which was marked by bailouts of several banks – BPN, BES and Banif – and capitalisation of state bank CGD, which required an injection of 3.9 billion euros. (macauhub)