Ahead of another politically difficult week, Portugal’s president Marcelo Rebelo de Sousa is in Germany today intent on appealing to Angela Merkel’s better nature over Portugal’s crippling debt levels.
The plan, say newspapers, is to make German authorities ‘aware of the injustice’ that economic sanctions, threatened by Brussels (click here), would represent.
Other issues high on the agenda are ‘the need to create a so-called bad bank to clean national banks of their failed loans’; the dire situation of State Bank Caixa Geral de Depósitos, and the equally gloomy prospects of the government managing to offload Novo Banco for any kind of useful return (click here).
Says Diário de Notícias, Marcelo’s feeling is that Merkel has “a lot of influence” and she should use this to ensure Portugal (and Spain) are not penalised for failing to meet EU-set deficit targets.
He is also hoping that his charm and persuasion will see her agreeing to a (new) €4 billion recapitalisation of CGD – which has still not repaid the last tranche of loan money it received.
In other words, President Marcelo is trying to wriggle through the icebergs of EU ‘rules and regulations’ – the same cited by both Eurogroup leader Jeroen Dijsslebloem and German finance minister Wolfgang Schauble as very good reasons as to why Portugal should not be let off the hook.
But while Marcelo has two days for this special mission – time in which DN says he will also be talking to President of the Federal Republic Joachim Gauck and president of the Bundestag, Norbert Lammert – elsewhere, financial pundits are predicting major doom and gloom.
According to Business Insider – a news website run out of the US with outlets throughout the world – “Portugal is Europe’s next looming economic disaster”.
Whatever happens with over the problems at CGD, and indeed other national banks, Portugal could be on the fast lane to a second bailout, warns HSBC economist Fabio Balboni.
Balboni’s reasoning centres on the fact that our banking fragilities will see public debt increasing (again), and this would prompt the only ratings agency that classifies Portugal’s debt above ‘rubbish’ to lose confidence.
Once Canada’s DBRS did this, it would leave Portugal without any access to European Central Bank quantitative easing benefits, which in HSBC’s view “would make a request for a new programme of financial assistance almost inevitable”.
Business Insider stresses Portugal is not alone in its difficulties.
“Greece is barely scraping through continued talks with its creditors, Italy has huge problems in its banking sector and massive political issues, and France’s striking workers highlight systemic problems with its labour market”.
But the site suggests that of all these issues, “Portugal appears closest to a new economic crisis”.
