The Minister of Finance has welcomed the decision of the European Commission to approve the recapitalisation plan for Portugal’s State-owned bank, Caixa Geral de Depósitos.
Mário Centeno said that the €3.9 billion injection of cash “respects European rules.”
"After the Caixa Geral capital increase, now authorised by the European Commission, Portugal has its main bank in a solid condition, thus contributing to the strengthening of the country's financial system and to the dynamisation of the Portuguese economy," waffled the Finance Ministry today in a vacuous statement that did not refer to the bank’s 2106 loss of €1.859 billion that has just been published.
The European Commission, in the form of the Directorate General for Competition, decided that the recapitalisation of Caixa Geral has been put together in such a way that it does not consider the €3.9 billion as State aid.
The avalanche of cod justification continued, "The recapitalisation of Caixa Geral is based on a business plan that guarantees its competitiveness. This plan is for a reorganisation of the bank with the objective of recovering the long-term profitability, by increasing efficiency, reducing costs, strengthening management, the modernisation of its commercial structure and the strengthening of its governance model," said the minister, making it sound so easy one could justifiably ask why this had not been done by previous, highly-paid boards of directors.
The European Commission believes that the business plan will ensure an adequate return for the State as shareholder under the same conditions “as would be accepted by a private investor,” while the thought of future losses based on a crippled loan book seems not to have entered in to the thinking.
The first part of the capital increase was completed in January this year with the transfer of ParCaixa shares to CGD in the amount of €500 million and contingent capital instruments (CoCo) 'subscribed' by the State in the amount of €945 million. The next stage will be the massive capital increase, in cash, shelled out by the taxpayer, amounting to a further €2.5 billion which will help delay any tax reductions and additional expenditure on roads, hospitals and schools - all of which have been promised.
Caixa Geral’s great plan includes attracting private investors for a further €930 million, as if anyone will want to invest in a bank whose unquantifiable liabilities lurk in dark corners despite the positive spin being put on this fiasco.
With the previous assurance that “2016 will see Caixa Geral back in profit” studiously airbrushed from history, Caixa Geral’s new Chief Executive, Paulo Macedo, claimed that the bank "will only have positive results" when the restructuring is completed, with the plan promising a return on equity of more than 9% in 2020. This will involve cutting 181 branches and 2,200 staff among other cost-saving exercises which do not include cuts to directors' enhanced remuneration rates.
The President of the Republic, Marcelo Rebelo de Sousa, was asked today about Caixa Geral’s 2016 losses and stated that the near-€2 billion negative figure was better than the €2.9 billion the European Commission and the European Central Bank were expecting, so he was “relieved.”
The PSD opposition party was not so 'tranquil,' not because the President appeared to be putting a political spin on the 2016 losses, but because “It is clear that there is a drastic worsening of results here and this must be explained," according to the Social Democrat MP, Duarte Pacheco.
What also must be published as soon nas possible are the results of the committee of inquiry which by now should have gone through the disastrous pile of non-performing loans to see how much was dished out to corrupt businesses, friends and family who somehow omitted to pay them back.
The government now will race to get this huge loan from the taxpayer into Caixa Geral's accounts before the committee of inquiry publishes its findings and the ticking bomb explodes.
Comments
AND THE IDEA IS: as the president is so easy to reach (see the ad hoc website of the presidency + also by normal postal mail) why should we not submit each time when necessary ALL our problems directely to the president ? The advantages are legio:
1. as such the president will be duly and fully informed of what is happening in his republic and 2. he has the power to intervene and as such to help the population out of the hands of the (Portugese) vultures. And idea worth to be experimented, isn't it ?
See para. 7
Ed