Every cloud has a silver lining – and Portugal is discovering this week how sweet that silver lining can be. Only days ago, international media was labelling this country “Europe’s next looming economic disaster”, while national papers were laying bets on a mercy dash by President Marcelo to appeal to Angela Merkel’s better nature in Berlin. On the agenda, we were told, would be the iniquity of real threats of economic sanctions emanating from Brussels and requests to bend European rules in favour of yet another multi-billion recapitalisation (this time of State Bank Caixa Geral de Depósitos). The situation was painted as dire as dire could be – but within two days it has all turned round. The truth, in the end, is that Europe has much bigger fish to fry. For the summer, at least, Portugal can bask in the knowledge that it will have millions of tourists arriving in droves, and the chance of making some serious money.
No-one would wish on any country the massive problems assailing economies like Greece, Italy and France, but they have beautifully taken the heat off Portugal – and the UK’s rising preoccupation over a possible Brexit is keeping Brussels suitably distracted.
Indeed, President Marcelo Rebelo de Sousa has breezed back from his meetings in Berlin saying he sees “no sign for preoccupation at all”.
Angela Merkel showed “great availability and support” on the part of the German people – whatever that actually means – and his conversation with her went a great deal better than he had hoped, he said.
Equally positive was the President of the Federal Republic Joachim Gauck, who “guaranteed that the German people had been following the efforts of the Portuguese with great respect” and that all this had to be taken on board before the sanctions growled about by German finance minister Wolfgang Schäuble were even considered.
The mutual bowing and scraping stopped short of raising hopes over CGD’s recapitalisation, the idea for the creation of a bad bank (to swallow the nation’s welter of underperforming loans) or what is to be done over the fact that no-one seems interested in plugging a €4.9 billion hole by buying-up Novo Banco.
“President Marcelo did not say a word about the German position” on these very crucial points, said national tabloid Correio da Manhã – “but he did say that there is no reason for pessimism there” either.
In a nutshell, this little country whose economy is in just as much of a twist as many others in Europe appears to have wriggled, albeit perhaps temporarily, off the hook.
And while US news website Business Insider carried a gloomy interview with HSBC economist Fabio Balboni over the weekend – in which Balboni suggested the need for a second bailout was only a little way down the line – it did concede that the picture had to be taken in the parlous European context.
iOnline attempted a form of reality check on Tuesday, suggesting Marcelo is playing two roles: the gambolling optimist abroad and the slightly more reserved account-watcher at home.
“He went to Germany to talk about April’s good budgetary execution, but he won’t stop sounding warnings about the budget (at home),” says the paper, as he is convinced that it will be impossible to finish the year without a shortfall – at least if there aren’t any additional measures.
“Does this sound contradictory?” the paper asks. “A source close to the President of the Republic guarantees that it isn’t,” describing budgetary execution as “something static, like a photograph”.
Adding to the celluloid imagery, the source added that “one needs to see the film to the end” – and the film will come to an end in December, which thankfully is a long, hot summer away.
A decisive summer, too, where Europe will get to know if it goes forwards united or whether one of its leading players decides to “leave the club”.
Against this unprecedented backdrop, the prospect of sanctions just because the country has failed to meet targets set by the excessive deficits programme is very unlikely, iOnline stresses.
Even more unlikely because they would also have to be applied to Spain – a country still in a state of political limbo which EU leaders do not want to see going too far to the left.
Marcelo predicts €600-800 million shortfall
Getting down to the nitty-gritty, iOnline succeeded in getting the presidential source to open up over the size of the looming shortfall that Portugal might expect at the “end of the film”. The source suggested a hole of “between €600 million and €800 million. Why? Because the growth forecasts and income within the State Budget are way above numbers that are emerging”, said the paper.
Patience is of the essence, says Finance Minister
In a less than kind interview on Portugal’s financial health, CNBC quotes finance minister Mário Centeno, without explaining that he was talking in English, and that this is why much of what has been reported is not even grammatically correct.
“Patience is of the essence at this moment,” Centeno told the news service. “The country went through an adjustment process, very strong in its public finances. It has an impact, for example it had huge flows of migration, out migration, that reduced the labour force. We need to stop that process and put all the forces, the internal forces of the country to work. And it takes time, we do understand that. The reforms, to materialise, they need time.”
Succeeding in painting Centeno as a kind of besuited gondolier reminiscent of the old Cornetto ads, CNBC’s report did not leave the reader with a great deal of optimism.
Centeno stressed that while CGD does need money, the government is still trying to work out how much.
“That’s the purpose of the operation, is to make Caixa a strong bank who is able to finance the economy because that’s one of the issues that we also need to make sure is operational, meaning we need financing for the economy and the banking system is key for that,” he said.
As we said at the beginning, every cloud has a silver lining – but clouds have a habit of raining on parades, too.
By NATASHA DONN [email protected]
Photo: SOEREN STACHE/EPA