Portugal’s cash buffer is the strongest in the EU

  • ECO News
  • 20 July 2018

Data from the first quarter of 2018 shows Portugal's government debt was the third highest at EU-level. Yet, in the indicator corresponding to cash buffer, Portugal showed the best result in the EU.

In March 2018, Portugal’s cash buffer reached 13% of GDP, accordingly to Eurostat’s quarterly data. Portugal got first place in this indicator, as the amount of currency and deposits in % of GDP reached a much higher value than the average of 3,3% from the EU28 aggregate, followed by Italy whose cash buffer was 10,5%.

Treasury and Public Credit Management Institution’s (IGCP) President, Cristina Casalinho, explained last year that the reinforcement of the cash buffer — the amount of currency and deposits saved up for an emergency situation — is a type of insurance the government finances have against eventual risks arising from funding crisis and unpredictable financial market fluctuations. This buffer has been introduced as a way to avoid the experiences from the 2008 financial crisis. The country had to turn to IMF and EU financial support as a last resort.

“In terms of crisis prevention, it is a very effective practice. I prefer to prevent, we can say I am rather conservative”, said Casalinho.

Portuguese debt is one of the highest in the Euro Zone

As demonstrated in the same Eurostat’s report, Portugal shows one of the highest government debt to GDP ratios in the euro area (EA19): 126,4%, corresponding to a gross value of €245,8bn. Only the Greek and the Italians surpassed the Portuguese this quarter, with 180,4% and 133,4%, respectively.

The 126,4% ratio reflects a bad performance in comparison to the 86,8% EA19 average. In March, the debt of all Member States reached €9,7Tn.

Portugal’s budgetary deficit was the third lowest among EA19 members, having reached this quarter 0,5% of GDP.

Government deficit to GDP ratio in the euro area (EA19) stood at 0,1%, presenting a decrease of 0,5 percentage points in comparison to the 0,6% value found in the fourth quarter of 2017.