//
you're reading...
Portugal

Portugal’s banks make huge profits from government debt

IN THE RADICAL PRESS / ESQUERDA.NET

By Alvaro Arranja

According to the financial press, Portuguese banks cut loans to companies by €6.8 billion euros this year. On the other hand they invested €7.4 billion in debt. Banks continue to reduce credit to Portuguese companies, despite warnings from the International Monetary Fund (IMF) and from the European Central Bank (ECB), which in December and February, opened its purse strings. The ECB’s two long term refinancing operations were supposedly to ensure that European banks would have sufficient funds to ensure that credit would continue to flow into the economy, despite the need to comply with debt maturing in 2012.

And so Portuguese banks got a real bargain, taking money meant for the economy to instead use it to profit from government debt. Which was the case of BPI [Portugal’s third largest bank by capitalisation ] as revealed by its latest profits.

In the last ECB operation, the Portuguese banking sector took almost €8.8 billion, at an interest rate of 1%. In the two months that followed, Portuguese banks invested €6.3 billion in Portuguese government bonds. In total Portuguese banks increased their exposure to sovereign debt in the country to €7.4 billion in the first eight months of the year, according to data released Thursday by the Bank of Portugal.

Of this amount, €5.4 billion were channeled into Treasury Bonds, which means that these securities have been acquired in the secondary market, since Portugal has not been issuing medium and long-term debt since the Troika ‘bail out’ in April 2011. In other words, these sovereign bond purchases were an investment not to ensure state funding.

Portuguese banks raised money from the ECB at 1% and then used this immediately to buy debt, earning returns generated from interest rates that, in the case of Portuguese debt, amounted to 15%.

This madness could be ended if the ECB directly financed governments at the same rate that it provided loans to private banks. For this reason, we will never see prime minister Passos Coelho, finance minister Vítor Gaspar or any other government politician support this change of role for the ECB. It would kill the goose that lays the golden egg. How would they guarantee their future seats on bank management boards?

The ‘crisis’ (ie, austerity and other forms of theft), must continue …

esquerda.net October 26, 2012

Translation by Revolting Europe

About revoltingeurope

Writer on Europe's Left, trade union and social movements @tomgilltweets or @revoltingeurope

Discussion

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Twitter Updates

Enter your email address to follow this blog and receive notifications of new posts by email.

DATA

Anti-social Europe in numbers

WAGES SLIDE

Key facts and figures on wages across the EU

Wealth Inequality in Europe

Get the key facts and figures

RADICAL VOICES

A different take on European issues

Italy’s Healthcare Crisis

Health services are ‘close to collapse’ in Rome, Turin and Naples after years of cuts and privatisation.

550 days, 29 Workers, Zero Job Losses

How a few determined Italian women stopped their factory closing and protected their livelihoods

Filthy Rich

France's Bernard Arnault of the Louis Vuitton Moet Hennessy (LVMH) empire is worth $41 billion. Check out Europe's rich list

SANTA DRAGHI’S COMING

Private banks receive half-trillion-euro gift from ECB

POPULAR FIGHTBACK

Workers and citizens stand up for themselves

FLORENCE’S BUS LUMACA

Workers are on a go-slow over privatisation

Popular resistance delivers results

Lessons from the victory against Madrid privatisation plan

FRENCH FACTORY OCCUPATION

Hundreds of workers occupied the factory of ArcelorMittal in Florange in the north of France

RSS Fight discrimination in Europe – Amnesty Int’l

  • An error has occurred; the feed is probably down. Try again later.

DOMESTIC VIOLENCE

in Italy the home is a very dangerous place to be

LABOUR RIGHTS

Follow Revolting Europe on WordPress.com

Subjects

EUROPE NEEDS A CITIZENS’ REVOLUTION

Read the statement by Lafontaine and Melenchon

The Troika in Portugal – Three Years On

A success story?

THE EURO

The Dossier

FRANCE

GERMANY

GREECE

ITALY

PORTUGAL

SPAIN