“Politically difficult” road ahead as government bails out TAP and nationalises Efacec

Pundits are pointing to ‘the beginning of the end of prime minister António Costa’ after yesterday’s Council of Ministers made the monumental decisions to bail out flagship airline TAP to the tune of €1.2 billion – and nationalise Efacec, the engineering company brought to its knees by its association with former first daughter of Angola, Isabel dos Santos.

On the face of it, this is the government ‘guaranteeing’ thousands of jobs and two important companies for strategic sectors (see update below).

Yes, Efacec is a long way from being as important as TAP, but the idea is only for a temporary nationalisation. Potential buyers are on the horizon, explain reports today. It’s only a matter of time before Efacec is reprivatised, and the confidence of clients and suppliers ‘restored’.

What all this means for State coffers is what is concerning leader writers today, who see the heat for all this flagrant spending during a major economic crisis as likely to fall heavily on the shoulders of Portugal’s current PM.

“Can António Costa survive this gigantic catastrophe with a minority government under his feet, kidnapped by a ‘contraption’ (cabal of parties of the Left) that always votes for more expense”, asks Daniel Deusdado in Diário de Notícias this morning – suggesting the collapse/ resuscitation of TAP “repeats the drama of BES for the second time in a decade, but is probably worse” because TAP doesn’t make money whereas BES did (it was simply allegedly ‘plundered’ by its top brass).

Meantime, the reality this morning is that there are a lot of “politically difficult” decisions to quote infrastructures minister Pedro Nuno Santos to be made.

Talking to the press, Mr Santos did not mention dismissals. He concentrated on the ‘positive’ aspects of the TAP deal which has effectively seen the government spend €55 million to ‘buy-out’ shareholder David Neeleman, while committing to the injection of up to €1.2 billion into the company, most of it this year.

Finance minister João Leão has stressed that these ‘expenses’ will be the only ones affecting Portugal’s public debt/ deficit. Subsequent expenditure, he says, would only have ‘residual’ effects on the debt/ deficit.

Throughout this ‘nightmare’ of what to do with TAP, the government has been clear: the airline is much too important for the nation to let fall. TAP does around €1.3 million-worth of business with Portuguese companies every year, and contributes to the country’s exports to the tune of around €2.6 billion. 
As has been constantly explained, decision-makers have been between a rock and a hard place – and yesterday’s deal is seen as a far better solution than all-out nationalisation.

That said, Efacec’s nationalisation appears to have ‘come out of the blue’ – but it is presented as a very neat way of shaking off Isabel dos Santos’ involvement which has been doing the company no favours since her name was splashed across the world’s media for allegedly pillaging Angola of hundreds of millions and more (click here), and her assets both here and in Angola have been ‘frozen’.

Say reports this morning, there are at least 10 companies interested in buying up Efacec, some of them Portuguese, others American, Chinese and Spanish.

What the nationalisation ensures is that salaries and potentially some bank loans can be paid and much-needed restructuring can go forwards.

Jornal Económico warns however that bank loans may not be paid in full: around €110 million was ceded by a group of 10 banks to ‘Winterfell’ – a company held by Ms dos Santos – to buy up her majority (71.73%) share in Efacec in the first place. That loan will be instantly lost in the nationalisation process, though a source has suggested that some kind of compensation solution could eventually be found.


It hasn’t taken long for PM Costa to admit that jobs, flight schedules and even planes will be affected by the restructuring programme coming into place.

Talking to journalists after the approval of Portugal’s ‘supplementary budget’ (see separate story), he stressed the €1.2 billion ‘approved by Brussels’ comes with provisos, and these “will certainly imply a reduction in the number of routes, a reduction in the number of planes and this will clearly have consequences on employment at TAP”.

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