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Portuguese report Portuguese report
by Euro Reporter
2011-09-07 07:21:41
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Banks' ECB borrowing up 4 pct in August

Portuguese banks' borrowing from the European Central Bank rose 4 percent last month from July, as institutions in one of the countries bailed out in the euro zone debt crisis remained unable to borrow from other banks. The Bank of Portugal said on Monday borrowing in August stood at 46.0 billion Euros ($64.98 billion), still below a record of 49.1 billion Euros it hit a year ago.

Investors' concerns about Portugal's public finances and a heavy debt burden have squeezed the country's banks out of the interbank market for loans, leaving them dependent on the emergency support made available by the ECB. Portugal is implementing austerity measures under a 78-billion euro EU/IMF bailout pact, which includes 12 billion Euros for banks to recapitalise. The plan also allows the state to guarantee up to 35 billion Euros in debt issuance by banks.

The country's main banks passed European financial stress tests in July, but the Bank of Portugal wants them to boost their capital and reduce dependence on ECB funding. Analysts expect the banks to remain reliant on ECB funds at least until Portugal can demonstrate it is making headway in meeting its fiscal goals.


German interest in privatizations

Portugal's prime minister, seeking to encourage German investment in his debt-troubled country, says the planned privatization of TAP Air Portugal would be a strong investment for Lufthansa. The Portuguese flag carrier would allow Lufthansa to expand in Africa and Latin America where TAP has a strong presence; Prime Minister Pedro Passos Coelho was quoted as saying in an interview published Friday in German newspaper Handelsblatt. Passos Coelho told the paper that TAP, currently fully-owned by the state, "would be a good investment for the German company."

His office confirmed the comments. Portugal, which earlier this year needed a €78 billion ($112 billion) bailout, aims to raise around €5 billion ($7 billion) through privatizations over the next three years. Lufthansa and TAP are both part of the Star Alliance, a global grouping of national airlines. TAP posted a profit of more than €63 million last year. Its total debt stands at almost €1.3 billion, according to its 2010 annual report. During his visit to Berlin on Thursday, where he held talks with Chancellor Angela Merkel, Passos Coelho said German investors "are very welcome in Portugal."

Portugal slid into a double-dip recession this year, and the economy is forecast to keep shrinking through 2012. The jobless rate is 12.3 percent and is predicted to reach 13.2 percent next year. Germany, on the other hand, is one of Europe's strongest economies. Passos Coelho said late Thursday during a trip to Paris that German electricity and gas supplier E.ON has expressed interest in buying a 20 percent stake the government plans to sell in Portuguese utility Energias de Portugal. The government wants to sell the 20 percent stake to a single buyer, he said.


Portugal throws ailing small firms’ debt lifeline

The Portuguese government agreed on Monday to give a one-year extension to struggling small and medium-sized companies in paying back some of their debt to banks to preserve jobs and avoid bankruptcies amid a recession. The economy ministry said in a statement it agreed the extension with financial institutions on loans granted to over 51,000 companies under the state-guaranteed PME Investe programme worth up to 1.85 billion Euros.

Portugal is in a 78-billion-euro EU/IMF bailout. The programme's tough austerity terms are expected to cause the economy to contract 2.2 percent this year and 1.8 percent in 2012. "The measure is meant to ease the current exceptional difficulties in financing of the Portuguese economy that means many companies are unable to obtain loans with banks that are fundamental for their viability," the ministry said. It added that the measure is designed to bolster competitiveness and jobs, especially in the exports sector.

The companies covered by the deal represent some 740,000 jobs or about 15 percent of the country's total employed workforce of about 4.9 million. They will still have to pay interest on loans received and have to be analysed and considered viable to qualify for the extension. According to industry data, nearly one-fourth of all small and medium-sized companies failed to pay their dues to banks on time in the first quarter, resorting to debt renegotiation or closing down

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