The Agência de Gestão da Tesouraria e da Dívida Pública (IGCP), that’s the one that issues government bonds to keep the country going, has been obliged to issued €1.3 billion of debt to start the process of covering the €3.9 billion hole left by the non-sale of Novo Banco.
This is but one of the initiatives of the agency as detailed in its re-written plan to keep the country’s finances on track after the central bank failed to sell Novo Banco, the business that it created from the burnt out wreck of BES last August.
The Bank of Portugal’s governor Carlos Costa (pictured) has given the treasury a headache and some unwanted political exposure just before the October 4th election.
The indefinite postponement of the sale of Novo Banco has left Finance Minister Maria Luís Albuquerque short of €3.9 billion so she must load the taxpayer with more debt, cut cost-efficient advanced payments to the IMF and stop transfers to her multi-billion euro 'rainy day' fund.
The new IGCP strategy sees the cancellation of an early payment to the IMF of €2.2 billion, the issuance of an additional €1.3 billion of debt, and the government financial cushion reduced by €400 million, from €9 billion to €8.6 billion.
Compared to the €20 billion bond budget this year (€17.6 billion already has been issued) the amount needed to cover Carlos Costa’s failure is annoying but not devastating.
The agency considers that the change of circumstances forced on the economy "does not significantly alter the IGCP funding strategy for the remainder of 2015 or the planned end-of-year cash position."
It makes Carlos Costa look pretty foolish though as his rescue plan for BES, instead of letting it go bust, was to create Novo Banco and fill it with all the good assets from BES while leaving the old BES with the 'toxic assets.' Novo Banco then could be sold on unencumbered and Costa would recoup the €4.9 billion loaned to the start-up business.
Great plan, but when the two Chinese bidders ended up individually offering less then €1.5 billion for the business, Costa saw his wished for outcome replaced by embarrassment and misery.
Now aunty Albuquerque has to arrange to cover Costa's failure but no worry, he has most of a new 5-year contract to run and an excellent pension scheme to look forward to.
