The President of the Republic gave the Bank of Portugal governor a free pass today by blaming the state of the country’s banking system on the Troika, rather than on the country's banking regulator who failed to spot that the light at the end of tunnel was, in fact, an approaching train..
Marcelo Rebelo da Sousa (pictured left with Germany's chancellor) said the Troika should have spotted that Portugal’s banks had chronic weaknesses and really should have done something about it sooner.
“This would have avoided part of the problem during the adjustment period,” said the president, when out and about in Lisbon today, fully aware of the latest OECD report on Portugal’s economic state.
Marcelo Rebelo de Sousa was asked about the report, which emphasises the banking system’s fragility, and replied that it all needs to be resolved “as soon as possible," adding that Portugal is "two steps away from an important moment for the consolidation of the Portuguese banking system: the sale of Novo Banco and the simultaneous resolution of its loans problem.”
In the opinion of the President of the Republic, it’s all "better late than never" and it is good that the international institutions discovered that Portugal banking system was "a problem".
"Part of the problem could have been avoided if it had been discovered a bit earlier,” insisted the president whose lack of knowedge of the role of the Bank of Portugal is concerning. The banking system's regulator would have known of the endemic weaknesses in Portugal’s banking sector yet remained transfixed as, one by one, the banks started to fail.
Of the Troika memorandum listing the country’s bail-out loan conditions, Marcelo Rebelo de Sousa said that "when there is a memorandum on which such important and qualified institutions have worked, such as the European Commission, the European Central Bank and the International Monetary Fund, it is a pity that the financial system had not been given due importance at the due time."
"But as I tell you, better late than never," he chirped.
The ever-cheery Organisation for Economic Co-operation and Development (OECD) reported today that investment in Portugal is more than 30% down on 2005 level and anticipates that unemployment will remain in double figures in the coming years.
In the riveting report on the evolution of the Portuguese economy, the organisation anticipates "moderate annual growth" of 1.2% in 2017, and says that private consumption has played an important role recently, but will slow down, "because job creation is too weak for consumer spending to continue to expand at the current level."
The OECD also warns that postponing a solution to the problem of bad credit "is a risky strategy" that jeopardises banks' health, investment and economic growth, urging the authorities to do more, stressing that bank fragility "needs to be resolved as soon as possible to reduce budgetary risks and restore credit growth."
All this was great news for the former Prime Minister, Pedro Passos Coelho, who took the opportuinty of criticising the socialist administration on the basis of the OECD report, primarily over structural reforms and falling investment levels.
The current prime minister will be taking succour from recent press reports that Portugal, despite having a left wing government, seems to be defying the odds and actually its economy is doing OK with various key indicators pointing in the right direction, with the notable exception of the national debt level which is 'unsustainable'.
