Perhaps the most uncomfortable person in Portugal this week is Finance Minister Mário Centeno. Originally presented as a “highly intelligent” member of Prime Minister António Costa’s ‘dream team’, pledged to turning the page on austerity, he has in fact shown himself to be something of a Mr Bean, without any of the giggles. His financial forecasts are in tatters, he is now at the centre of a controversy that seriously threatens the future of Portugal’s state bank Caixa Geral de Depósitos and, to cap it all, he is looking like he doesn’t tell the truth. With a visiting German economist describing Portugal this week as “bankrupt”, and the only ratings agency that rates the country threatening to pull the plug on CGD altogether, things could hardly look worse.
So, how did Portugal get into this mess and where exactly are we in it?
To recap as briefly as possible, the ongoing soap opera about an administrative team refusing to divulge its assets and earnings – a prerequisite for all bosses working in the public sector – ended on Monday with most of the members “slamming the door” (as the expression goes here) and storming off from their millionaire appointments.
This leaves the state bank that has four million clients, 1,200 branches and 8,800 staff (just in this country) suddenly bereft of its so-called white knights, drafted in to oversee a €5 billion recapitalisation.
Opposition parties have wasted no time in decrying the situation, saying it is time the government came clean over all the incompetence that led to this ‘disaster’ – but the truth is that CGD has been managed incompetently for the last 12 years (says weekly newspaper SOL), and the recapitalisation plan is almost bound to fail anyway (this comes from Expresso, quoting the Financial Times – but more of this a bit later).
Into the mix charges Canada’s DBRS ratings agency, saying it can’t see how it can go on giving CGD a passable rating, while elsewhere the dreaded troika team is back in Lisbon, no doubt even more po-faced over Portugal’s prospects than ever before.
Perhaps the only faint flicker of light on the horizon came in comments by one of the only figures in power who will never need a bodyguard. President Marcelo – so adored by his countrymen that a walkabout in Guimarães this week saw him feted like royalty – has said maybe the administrators’ walkout “is not a fundamental question” after all. “People change, but strong institutions remain,” he said.
It was a valiant try but, of course, whether CGD is strong enough to weather this latest storm remains to be seen.
Perhaps the worst of this whole debacle is the contention by outgoing CGD president António Domingues that he and his team had been promised they would not need to divulge their wealth and assets as part of the hiring deal.
On the basis that the buck stops at the top, this leaves Mário Centeno with the responsibility of saying “yes, this confusion is all my fault” – which of course he hasn’t.
But as we write, this is all rapidly becoming ‘old hat’ – possibly to dig Centeno out of the latest hole as he staggers with the country’s financial brief like a man trying to walk across quicksand.
Now the onus is on the government “working against the clock to find a name to lead CGD”, writes Público, explaining that the situation “has become even more difficult to manage for the team of Mário Centeno”.
The reason, says the paper, is that the process for choosing a name is “habitually time-consuming”.
It may get to the point that the ECB (European Central Bank) has to step in – though prime minister Costa has stressed the government is working hard, and only not suggesting names as this might “saturate public opinion”.
As has been a ruse of successive governments, one of the few names in the air is a former politician from a different party: Paulo Macedo was the last PSD-led government’s choice for health minister, and in nominating a former member of the opposition, the PS could avoid more of a backbench backlash.
According to Público, Macedo is being seen as “an ideal choice” as he has got the “profile more of a politician than of a banker” which so riled the radical left in the case of outgoing António Domingues.
Nevertheless, even if Macedo is chosen, he has to come up with a team that can lead CGD to brighter pastures. This will be no easy feat: the recapitalisation package agreed with Brussels has already been criticised by institutional investors, who told the Financial Times that after the Bank of Portugal’s shenanigans over senior bonds in the recapitalisation of Novo Banco, no-one has the stomach to buy into Portuguese debt. If they are right, that would leave the plan at least €1 billion short.
Thus the next few weeks will be pivotal, and that’s before we hear what the troika may have to say after their latest post-adjustment programme evaluation, taking place in Lisbon this week.
Deutsche Bank economist says “Portugal is bankrupt”
As if the CGD soap wasn’t bad enough, Rádio Renascença broadcast an interview this week with former Deutsche Bank economist, Thomas Mayer, in which the financial expert said the country is “bankrupt”, and only kept from admitting this because Canadian ratings agency DBRS persists in evaluating the national debt as one position above junk level. Every other ratings agency has maintained Portugal’s junk rating, albeit with the proviso that this appears to be ‘stable’.
Echoing warnings issued by Germany’s finance chief Wolfgang Schäuble, Mayer suggested that the best way forwards could be for Portugal to leave the euro – a scenario PS leaders have always rejected.
Photo: Finance minister has yet to say “yes, this confusion is all my fault” – which of course he won’t.
Photo by: MANUEL DE ALMEIDA/LUSA