The Technical Unit for Budgetary Support (UTAO) said on Friday that the financing of 1.2 billion euros to TAP "carries a high risk of capital loss for taxpayers."
The Technical Unit for Budgetary Support (UTAO) considers that the financing of 1.2 billion euros to TAP “carries a high risk of capital loss for taxpayers,” according to a report released on Friday.
“The financing of 1.2 billion euros to TAP, intended to meet immediate liquidity needs […] is not an injection of capital, but carries a high risk of capital loss for taxpayers, not only because of the pandemic, but also, and perhaps above all, because of the economic difficulties of the TAP group”.
The document, which analyses budgetary developments in 2020, stresses that the airline “was already showing negative results before the pandemic, but the restrictions on its business because of the pandemic worsened its loss-making situation, precipitating the request for support made to the Portuguese state.
“The restructuring compensatory measures required by the EC [European Commission] in order to authorise state aid are substantially more restrictive as regards the size of the companies and provide for shorter repayment periods for public capital” than the aid provided in the context of the Covid 19 pandemic, says UTAO.
For UTAO, “the need for financial support from taxpayers, in the form of a loan, guarantee or capital contribution, already existed before the pandemic broke out”, and that “the need for financial support from the State will continue for several years, given the political determination to keep the company in business by implementing its restructuring plan”.
“Therefore, this is not a temporary burden for the State created to mitigate the damage of the pandemic in the group’s accounts. It will be repeated for an undetermined number of years,” warns UTAO.
“It was an acquisition of financial assets with a high probability of total capital loss,” being, “by far the largest of the medium and long-term loans granted in 2020 to 15 national public entities” which totalled 2.594 billion euros.
The aid operation to TAP is considered, in public accounting (treasury perspective), “as financial and has no effect on the overall balance”, but from the perspective of commitments assumed (national accounting, which counts for Brussels), “the risk of the creditor having a significant loss of capital determines its classification as a capital transfer, counting negatively for the budgetary balance in 2020.”