Novo Banco is to demand €1.1 billion in taxpayers’ money in March, as is its right under the sales agreement arranged by the Bank of Portugal.
The current year’s national deficit target is 0.2% which is now set to more than double to 0.5% diue to Novo Banco’s cash call.
The Government will have to revise the deficit, risking opprobrium from Brussels, due to the Bank of Portugal’s lax deal that failed to take into account public interest when it handed over 75% of Novo Banco to the US vulture fund, Lone Star – for zero euros.
As for planning ahead, the finance minister took a worst case scenario for Novo Banco and budgeted for a €400 million cash injection – the billion plus demand blows this careful plan out of the water and may effect the government's delicate relationship with its financiers.
These new deficit calculations illustrate the continuing impact that the Novo Banco is having on taxpayers.
The Treasury can only lend the Resolution Fund €850 million a year, so the balance will have to come directly from taxpayers.
The Bank of Portugal’s negotiation led to Novo Banco having access to a maximum of €3.89 billion of funds, a total we were told would never fully be drawn on but which is looking more likely to be used in full.