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Government registered submarines purchase twice

The Portuguese government put down the expected expense, from the purchase of two German-made submarines delivered last year, twice.

Although the military hardware had been paid for in December 2010, as stated by the Ministry of Finance, the Government again asked the Portuguese Parliament to authorise the payment of €1 billion this year in order to pay for the same two submarines.

The amount set down in Section 60 of the State Budget (OE), which is for extraordinary expenditure, was for a further €1 billion – a mistake.

The submarines are to be paid for by the last month of 2011, but the State Budget 2011 will not be changed despite that mistake, leaving an oversight of €1 billion in the public accounts and an apparent surplus which could be spent on something else.

The Ministry of Finance has blamed the doubling up of the expenditure in government accounts with the justification that it didn’t know the exact delivery date for the second submarine.

The ministry also added that “under the terms of the contract it was anticipated that the payment would be made when the Portuguese state had taken delivery of the second submarine”, which took place in Germany in December 2010, when it left the shipyards in Kiel.

In October last year the Government made its intention clear to pay for the two submarines in 2010, which in fact happened, instead of splitting the expense between last year and this year.

Now a sum of €1 billion, set aside to pay for the submarines this year, is no longer necessary.

The Ministry of Finance has not revealed whether the additional cash will be used for another purpose.

The first submarine, the Tridente, arrived in Portugal in August 2010. The second, the Arpão, arrived in April this year.

The purchase of the submarines in 2004 under the then PSD government of José Manuel Durão Barroso, and signed by the minister of defence at the time, Paulo Portas, has been surrounded by controversy and scandal for two years.

The Government claimed that former executives at the German industrial giant Ferrostaal, which manufactured the submarines, had, together with a consortium of Portuguese component companies, defrauded the State out of €34 million.

It was also claimed that €1.2 billion in offsets – business spinoffs organised by the German company for Portuguese industry – fell far short of the agreed contracts, while allegations that Portuguese company bosses involved had been bribed by the Germans to issue false invoices went to court in Lisbon last year.

The court case was complicated by the fact that the consultancy organisation charged with producing expert reports for the Government’s legal case, was also providing reports for the German company too, in an obvious conflict of interests.

The entire case became a national joke after it also emerged that one of the lawyers working on the case for the prosecution against the German executives had been having a romantic relationship with the president of the consultancy involved.

Since then the new administration at the industrial giant Ferrostaal has agreed to reschedule the offsets and fulfil them under the terms of the contract.