Portugal’s Minister of Finance Mário Centeno is in negotiations with the European Commission to fiddle the figures.
Centeno is looking for a ‘more favorable accounting treatment’ for Portugal’s national accounts as he wants to send Caixa Geral de Depósitos a taxpayers’ cheque for €4 billion but does not want this to appear in the figures.
Under the commonly accepted accounting rules and traditions that everyone else has to work with, refinancing (or bailing out) a bank with public money would show up in the year-end accounts as 'bailing out another bank: €4 billion.'
The result of injecting the money that Caixa’s new chief says the bank needs, would push the country's year-end deficit from a target of 2.2% to 4.3% which will cause all sorts of problems with lenders and would choke off access to yet more money from Portugal’s paymasters. It's unlikely the 2.2% target will be hit anyway, but you get the point.
If Caixa gets the money, Portugal’s government knowingly will be violating the Stability Pact target deficit of 3% for 2016.
Mário Centeno wants to try and have the Caixa Geral refinancing accounted for in a way that it does not show up, much like the hideously expensive PPP agreements, which is why they were so popular with many governments including Portugal’s.
So, Centeno’s €4 billion will be accounted for as government debt rather than in a way that would push up the deficit. The interest payable on the €4 billion bailout money, around €130million a year at current borrowing rates, would have to appear in the national accounts but unless Caixa defaults on the money owed to the State, as Banif did, at least there will be a corresponding credit.
Mário Centeno "is dealing with Brussels for the re-capitalisation of Caixa to be considered a financial transaction. If so, this will have no impact on the deficit, but on government debt," confirmed an official source at the Ministry of Finance.
One day the government of Portugal will appoint ministers of the required caliber, until then, we will have these sorts of fiddles going on which fool nobody. €4 billion is €4 billion, whichever way you account for it.
