Head of technical unit for budgetary support puts former finance minister on spot
Portugal’s much-lauded fall in public debt under PS Socialists last year was artificial. Who says this – corroborating claims from the centre-right government which took office in April – is Rui Baleiras, coordinator of UTAO, the country’s technical unit of budgetary support.
Baleiras told a parliamentary hearing yesterday – incidentally requested by right-wing party CHEGA – that former finance minister Fernando Medina set out to keep public debt below 100% “and he did” – but he did it in a way that was “unusual”. He “used an expedient to guarantee a ratio below 100% until the government left office”.
This expedient involved the purchase public debt security by public administration entities at a level that hadn’t been seen previously.
“An important part of the fall in debt” was due to the significant purchase of government bonds and treasury bills. “These net purchases by public entities totalled €8.3 billion. This is an increase of 52% on the previous year,” explained Baleiras.
ECO online’s report on Baleiras’ explanations stressed that UTAO’s conclusions came after “requesting “non-public data from the Bank of Portugal” (coincidentally under the leadership of another former Socialist finance minister, now central bank governor, Mário Centeno).
Fernando Medina essentially financed the fall in public debt, says the paper, with future pensions. That’s not to say future pensions were put at risk – nor were any pensions stopped because surplus tax revenue was invested in public debt. But “to what extent is it prudent to increase the exposure of these assets?” Baleiras queried.
None of this is ‘new’. There were mumblings early on regarding the situation at Águas de Portugal. It is simply that yesterday’s ‘testimonies’ before MPs ‘cleared the air’ somewhat and showed that yes, there were “unusual operations” at the end of the government’s tenure, seemingly designed to ensure it emerged in a ‘glowing light’ – to both the advantage of PS Socialists, and potentially to Fernando Medina himself.
Talking to CNN Portugal, ECO journalist António Costa suggested Medina had acted like a student who did little work all year, and then crammed at the last minute so that he could pass. “The end of 2023 was frenetic; anything went for Fernando Medina to be able to announce to the country, in the middle of an election campaign (that the government had succeeded in reducing public debt by the ‘magic’ 100% of GDP mark (…) It became known as the ‘o brilharete orcamental’ (budgetary brilliance)…”
ECO’s reporter stressed that, realistically, it is neither here nor there if public debt is at 100.4% or 99.1% (as Portugal’s was presented): but for politicians, the one percentage point meant a great deal in terms of political campaigning, particularly during an election campaign.
As for the situation which led to the resignation of the president of Águas de Portugal, this too took place on the last working day of 2023. It was not something that structurally reduced the country’s debt – it simply helped reduce it ‘politically’, said Costa.
ECO’s reporter also pointed out that by putting Águas de Portugal ‘on the spot’ in the way that he had, Medina was leaving the entity in a position that it could have had to request a new injection of capital, which would result in ‘financial adjustments’ to tariffs (meaning, everyday people, in the end, would have had higher bills to pay…) “This is very serious”, the journalist told CNN – it implies ‘reducing the country’s debt, politically, at the cost of consumers’.
It is still not clear what will happen, as the incoming government has refused to increase Águas do Portugal’s capital as outgoing prime minister António Costa announced would happen (on the last working day of 2023).
Conclusion? “There has to be more transparency; stronger leadership which does not use presidents of public entities as if they were boys at the service of the minister in charge at the time”, ECO’s reporter told CNN.
None of this has been widely publicised today, but it may become ‘larger news’ if and when former Socialist finance minister Fernando Medina reacts.
