Interest hikes threaten economy says banker

 In Economy, News, Personality

Portugal’s most famous international banker, António Horta Osório, has warned that rising interest rates could threaten the economy.

Horta Osório, who took over as non-executive president of Credit Suisse this year, said at the closure of the conference ‘The Banking Sector of the Future’ argued that Portugal’s priority should be reducing its public debt which went up considerably during the pandemic.
The banker says this debt has to be brought down because European Central Bank interest rates will start to rise, and as a result increase costs of financing the pubic debt.
“If we’ve got a debt of 130%, if sooner or later interest rates climb to 2%, this will mean an extra 2.5% on GDP, it will cost Portugal around €5Bn”, he said.
On the other hand, Horta Osório says there needs to be a debate about how public money is allocated: “Are we allocating money on current expenses or on investments for the future?”
While he said money was better employed by business owners (…) and that private initiative creates more wealth, it is important that there are “nets” to protect people, and that sectors are well regulated. “But resources create greater wealth if they are applied by their owners”, he said.
On the ECB opinion that the current high inflation is temporary, — which was repeated during the conference by the Governor of the Bank of Portugal, Mário Centeno, the Credit Suisse president said the situation was “challenging and worrying”.
Portugal also suffered from anaemic growth. “We have a clear problem of growth and ambition in Portuguese society. Are we satisfied with the level of wealth that we have? Shouldn’t we be more ambitious?
“Why is Portugal growing only 1% per year (on average) and Ireland, which is small like us, is growing 5% a year?”
And in Ireland, he said, the average wage is €2000 a month whereas in Portugal the average wage is a “dramatic” €1,000 per month.
“In practical terms this means that in 20 years the Irish have doubled the their average salary in relation to Portugal,” said the banker who also has headed Lloyds Banking Group and Santander.