The amount injected in CGD by the Portuguese State represents 2.1% of the GDP expected for this year. If it is included in this year's deficit, it will be higher than 3%.
In July, Eurostat gave Portugal a warning: the decision on whether or not the public recapitalization of Caixa Geral de Depósitos (CGD) will be included in the 2017 deficit would only be made in September. The deadline is coming up and the European statistical office is determined to include the 3,944 million euros the State injected in the public bank in the deficit, which would bring it up to the 3% threshold.
The news were disclosed by Jornal de Negócios, which states that the Portuguese authorities are presenting arguments against that decision. Statistics Portugal (INE) believe that CGD suffered losses, such as other banks did, in a context of economic recession in the country, so the recapitalization should be seen as a normal operation in the market.
Simultaneously, Portugal argues, the recapitalization answers the new regulatory demands and respected the competition rules of the single market. Therefore, the European Commission should not considered this to be a State aid.
Eurostat, on the other hand, argues that the successive losses CGD caused should force the 3.9 billion euros injected by the state to be registered as a capital injection in a deficient public company and, therefore, should have an impact on the deficit. In addition, losses since 2012 surpass the recapitalization amount, so it cannot be argued that there are perspectives of future profit.
In their July analysis, Eurostat detailed that the amount injected by the State in CGD represents 2.1% of the projected GDP for 2017. “Given the complexity of this operation, there is an ongoing exchange of information and dialogue between Statistics Portugal and the European Commission (Eurostat) regarding its recording in national accounts. This discussion is expected to be concluded in September 2017“, Eurostat stated.
INE is presenting, this Friday, new data on the Excessive Deficit Procedure, although it is still unclear whether or not it will include the impact of the recapitalization in these accounts. Without that impact, the Portuguese Government expects to have a 1.5% deficit in 2017.