Shock report reveals €410 million “hole” due to Portugal’s disastrous swap-contracts

IGCP, the agency that manages public debt, has flagged an ominous €410 million “hole” in public finances threatened by the uncertainty of numerous “swap contracts” – fixed interest loans.

The greatest potential loss, claims IGCP’s latest report, is associated with the contracts of state-run firm Parpública that stand to drop as much as €205.1 million.

Then come contracts entered into by the Metro de Lisboa – which could lose €147.7 million; Carris (-€26.6 million), the Metro de Porto (-€24.1 million), CP (-€3.7 million) and the Transtejo ferry company (-€3.2 million).

IGCP’s role is to “cancel swap contracts, with a view to the lowest losses possible”, explains Correio da Manhã, adding that the institute answered journalists’ questions of what its report might mean with the warning that the potential €410 million hole did not include another fatal “swap” being adjudicated between the Portuguese State and Santander Bank in London.

As CM explains, last year IGCP decided to cancel three swap contracts existing at Carris, CP and Refer. These “resulted in an effective loss of €86.6 million”.

Observador website puts the headaches into context, explaining that low interest rates and the European Central Bank’s ongoing programme of quantitative easing are causing these financial holes to appear, as the swaps are leaving debtors with increasingly higher repayments.

Indeed Observador puts the potential losses this year at €636.5 million, saying the situation has worsened since 2014 by as much as 76%.