“Atomic bomb” threatening Portugal’s financial system not so expertly defused…

Yesterday it was described as an atomic bomb for confidence in Portugal’s financial system, today it looked like it might have been defused.

We’re talking about the surprise support by normally conservative PSD MPs for a left-wing proposal, by Bloco de Esquerda, to block the (already agreed) transfer of €476 million from the Resolution Fund – notoriously broke and relying on the government for cash injections – to Novo Banco.

The support came at the 11th hour of a gruelling day of votes over the 2021 State Budget, due to be approved today, by the very skin of its teeth.

Reactions from PS Socialists were scathing. PSD were labelled “irresponsible and cowardly”. Other parties, like Iniciativa Liberal, threw in their pennyworth – but today the after-shocks looked like calming, PSD admitted, ‘yes, well, it might change its mind, depending on the results of the independent audit underway…’ If that comes to the conclusion that the money should be paid, the PSD would vote accordingly.

The PS proposal was reworded, a second vote was called… but the PSD voted in exactly the same way.

In one respect it ‘made no difference’: the budget went on to pass, albeit ‘only just’.

But in another respect, it made all the difference: the government is now effectively bound by a vote in parliament prohibiting it from making payments to Novo Banco that were agreed under the terms of the ‘catastrophic deal’ forged back in 2017 with American equity firm Lone Star.

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