ESM saved Portugal 8.4Bn€ in interest rates

Portugal is estimated to have saved 8.4Bn€ in interest rates between 2011 and 2018 thanks to the loans from the European Stability Mechanism (ESM). The estimate comes from the ESM itself that expects Portugal to pay an anticipated reimbursement of what is owed to pay from next year onwards.

Klaus Regling, ESM Executive Director, told “the successful exit of Greece from the bailout programme in 2018 followed Ireland, Spain, Cyprus and Portugal”, stressing the benefits of these loans. “Thanks to low-interest rates and extended maturities of our loans, Greece has saved 13Bn€ in its budget comparing with getting funds in the market”. Following the same logic, Portugal and Cyprus were also among the most benefitted.

ESM calculated the saving in % of GDP, concluding that Portugal saved 0.7% of GDP per annum over the last five years. If one takes into account the country’s gross domestic product over that period, 0.7% over five years corresponds to 8.4Bn€.

The saving results from the difference between what Portugal would have to pay by issuing bonds in the market and what Portugal did pay by taking these ESM loans. It is important to remind that, in 2011 and 2012, 10Y bond yields were higher than 10% and, regardless of their lowering over the following years, only in 2018 it was possible for Portugal to issue bonds with a lower yield.

Thanks to historically low yields, Portugal might be now ready to accelerate the reimbursement to this entity. The Mechanism believes that “Portugal is committed to anticipating a reimbursement of up to 2Bn€ between 2020 and 2023, subject to the market conditions and debt sustainability.”