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Portugal's national debt shock - up €9.5 billion in a year

bop2As Portugal’s prime minister goes out and about, telling all and sundry that the country’s finances are fine, and the finance minister shows the Eurogroup that the 2016 year-end deficit will be well below expectations, the Bank of Portugal has been obliged to tell the awful truth.

Portugal’s national debt grew by €9.5 billion last year.

This figure is way higher than we were led to believe at the beginning of the year and threatens to torpedo the government’s revised October 2016 projections.

According to the official data presented on Wednesday by the Bank of Portugal, public debt (according to the criteria used by Europe) reached an eye-watering €241.1 billion at the end of 20016.

This is an increase of €9.522 billion, up 4.1% on December 31st, 2015.

The Bank of Portugal can not yet show this figure as a percentage of GDP, as the year-end figures are not in, but if you assume that GDP reached the amount predicted by the government, the 2016 year-end debt represents 130.1% of GDP.

This figure is higher than the 129.4% of GDP that the Government estimated last October which itself was an upwards revision from the original estimate of 124.8%.

There may have been a miraculous economic boom during the last quarted of last year, but if not, we are stuck with a massive and internationally embarassing failure.

The reason is the government’s addiction to borrowing more and more money by issuing bonds. One reason for this was the expected cost of refinancing Caixa Geral last year, which now will not happen until later in 2017.

In the last open debate in parliament, the prime minister repeatedly was questioned about the value of Portugal’s public debt for 2016.

He failed to respond with a figure, but now we have it - and so does he.

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Comments  

+1 #6 Ed 2017-02-06 10:12
Quoting haroldo:
may be Portugal needs the oil industry to come , but with better financial conditions and the latest technology to protect the environmental pollution/beaches. This can help to reduce the public debt. The EU has destroyed/reduced in the past a lot of economical activity in Portugal such as olive oil ,leather, textile,cork,corn etc. productions .People are crying for jobs and a reasonable income.
Where will the money be coming from? Offshore oil jobs will go to experienced international oil men paid through their chosen fiscal domiciles and paying little or no tax. Gas will be transferred to the Repsol plant in Spain. There is no contract condition that says that oil must be landed in Sines or anywhere else in Portugal. All contracts don't pay the lamentably low royalty rates until "all costs have been recovered" which could be years. This oil wealth is an illusion. Renewable energy technology offers real, onshore jobs like the ones at the windmill turbine factory that has announced a huge new contract. (See last night's news).

How has the EU destroyed the cork industry? I think Americo Amorim might disagree as he remains the richest man in the country.
-2 #5 haroldo 2017-02-06 09:54
may be Portugal needs the oil industry to come , but with better financial conditions and the latest technology to protect the environmental pollution/beaches. This can help to reduce the public debt. The EU has destroyed/reduced in the past a lot of economical activity in Portugal such as olive oil ,leather, textile,cork,corn etc. productions .People are crying for jobs and a reasonable income.
+7 #4 Jack Reacher 2017-02-02 18:08
Portugal will just bury its head in the sand..And hope the debt goes away. Either that or skulk away from the failing EU disaster and leave the other countries to fight over the scraps of euro change. All we need now is an oil spill to tarnish the Algarve Tourism industry and send Portugal back to ground zero.
0 #3 Steve.O 2017-02-02 14:30
No doubt last weekends Graeco-Roman Lisbon Summit focussed on how best, now the US is doing it, can we south Europeans stuff the Germans? The Germans have caused all our euro problems - their intra-EU exports killing off our indigenous businesses and straight jacketing all our different economies into euro area compliance measures. The others barely touching on Spain and Portugal's obsession - How best can we stuff the British in Brexit negotiations?

Can we all now comprehend a mass default exit of the loser euro economies? Leaving the remaining euro countries, including Germany, to clean up. Or - more likely - bail out themselves. A major headache for the IMF. Which, along with the Germans, the Greeks want to stuff.
+3 #2 Peter Booker 2017-02-02 12:32
As far as the debt is concerned, the only way is up. And I suspect that the globalised banks and oil industries have got together to say to Costa: allow us to drill for oil, and we shall overlook your debt problems. And by the way, we shall take the profits from the extraction of oil in Portuguese waters.
+8 #1 Martin Davies 2017-02-02 09:27
Very timely analysis from Bloomberg's Gadfly .... that Portugal has borrowed to the limit of ECB support.

.... next to no progress in reducing the debt to GDP ratio, Europe's third highest after Greece and Italy. ... a fundamental problem that will never be resolved unless there is a debt writeoff -- which unfortunately would only be over Germany’s dead body.

(And) Portugal’s support mechanism is being taken away from it while it very much still needs all the help it can get...... it looks like officials have lost the appetite to bring it (debt) under control and keep the troika onside.

https://www.bloomberg.com/gadfly/articles/2017-01-30/portugal-s-debt-stumble-might-cost-bonds-their-gold-star

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