Mário Centeno

Portugal’s central bank governor warns of ‘new financial crisis’

With new figures out today to show yet another dizzying record for public debt (now running at over 736.6 billion euros), governor of the Bank of Portugal Mário Centeno has warned of the risk of a new financial crisis.

Alerts on this level have started coming in thick and fast.

Specialists have been talking to the media about a ‘time bomb’ in the form of bank moratoria on credits which have been taken up by well over 700,000 families.

Once these expire and people have to restart making repayments, economists fear thousands may be unable to – which in turn could threaten ‘implosion’ of the banking sector.

“Moratoria are essentially a way of delaying serious problems which will continue to exist”, explained professor at the ISEG Tiago Cardão-Pito.

For now, the moratoria in place extend to September 2021, but it’s clear the government is already studying how to face this deadline when it comes.

Mário Centeno’s concerns have been raised with all this in mind. At a meeting with the IMF last week he stressed there have to be “changes in the protection of existing jobs, and more support for new hires in the dynamic sectors”.

This was a case very much of ‘preaching to the converted’, but what it will mean in ‘real life’ in Portugal vis-a-vis how syndicates take it onboard is another matter..

The overriding message was that there has to be a “wise usage of funds that buttress growth” to allow economies to overcome the ‘debt problem’.

“After all debt is sustainable if the debtor generates sources of income”, said Centeno.

The understanding is not simply that Portugal manages funds ‘wisely’ but that a level playing field is secured at European level.

“Next generation EU programs are key to achieve that goal”, he said in a speech where the final words were: “All instruments are needed. The current crisis cannot morph into a financial crisis. It’s crucial to preserve the role of our financial institutions”.

[email protected]