Portugal’s deficit increasing by €1 million per hour

With electioneering now in full swing, Prime Minister Pedro Passos Coelho’s ruling coalition suffered a major blow yesterday with the irrefutable proof that the government’s financial forecasts are way off the mark. Just 10 days from the country’s date to go to the polls, national statistics institute INE has revealed that Portugal’s deficit is rising by a terrifying €1 million per hour. Instead of the government’s repeated insistence that the deficit would come in at 2.7% of GDP by the end of the year, it is on track to shatter all expectations with a shocking 7.2%.

The financial catastrophe behind all this is the Bank of Portugal’s failure to sell the “good bank” that morphed from the BES debacle, with very little “good” to show for itself.

The bank has registered catastrophic losses – €468 million from August to December last year, and another €252 million for the first six months of 2015 – it has a dizzying list of creditors “dropped” during the carve-up from BES who refuse to go away and there is no bank or financial institution that thinks it is worth the €4.9 billion that the Resolution Fund ploughed into it.

But as international media picks up the news, Passos Coelho has managed to turn it all round, saying “the money is working for us”.

Justifying the deficit as he toured the country – being kissed by so many women that one newspaper carried a photo of him almost losing his glasses – the PSD leader explained: “As we did not nationalise BES, simply lending money to the Resolution Fund, when later the money returns, the country will manage to get more in interest. It’s money that is working,” he added. “And this way, we are not losing any opportunity.”

It was a form of mental arithmetic that has caused howls of outrage from opposition parties who point out that “after three years of financially stripping the people, we have a deficit that is identical to that of 2011, and the debt is rising”. The words, from CDU figurehead Jerónimo de Sousa, have been echoed by the Bloco de Esquerda and PS.

As Portuguese media remarks, “the deficit numbers have put new wind into Costa’s sails”.

For now, the figures have been sent to Brussels where they will be digested “in the context of the Procedure for Excessive Deficits”, reports Correio da Manhã.

Meantime, the various parties’ “election caravans” continue to roll round the country giving their spin on the state of the nation.

Leader writer Armando Esteves Pereira comments in Correio Direto this morning: “Fifteen years ago Cavaco Silva sounded the alert over public spending, saying it wasn’t possible to ‘dominate the monster without pain’… The monster continues to be indomitable and it is a huge threat”.

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