Portugal still paying from bank bailouts

The fallout from various bailouts by the Portuguese government to the country’s banking sector since 2007 is still weighing on Portugal’s public accounts, both in terms of budget balance and public debt.

But according to a report by business daily Negócios, a similar pattern has been seen in several EU countries where tax payers were called upon to prop up the financial system during the Great Recession and Sovereign Debt Crisis. (2007-2014)

In 2023, the legacy of successive bailouts to the financial system had an impact on Portugal’s balance of €1.3Bn or 0.5% of last year’s GDP.

Portugal was the country in the EU that is still paying the biggest price from its bank bailouts and according to the European Commission’s Excessive Debt Procedures, and based on information sent to Eurostat by Portugal’s National Statistics Institute, it shows that Portugal’s coffers took significant losses, this time from the legacy of failed bank Banco Português de Negócios (BPN) and the Deferred Tax Assets (DTAs) from Novo Banco.

In 2023, the Portuguese government had to register additional non-recoverable banking sector losses of €915.9 million held by Parvalorem, a public company that manages credit recovery among many other services.

Added to this was a sum of €117 million regarding the conversion of the DTAs from Novo Banco into refundable tax credits.

The EU Commission states: “Two Member States (Greece and Portugal) are continuing to pay high interest rates on debt related to the financial bailouts” adding that in Portugal: “The negative impact in 2023 (0.49% of GDP) is mainly down to the restructuring and merger of Parups and Parvalorem, two companies set up in 2010 which imply complete revision and reevaluation of its non-productive credit portfolios held by these entities, and which in the latest analysis led to fresh but expected losses of €900 million.

The INE has accounted for €1.703Bn of gross expenditure (on the banks) in 2023. State revenues from financial sector support operations — including commission, interest and dividends stood at €388 million. Therefore last year these operations created a loss of €1.3Bn.