The Portuguese Government may still try to access loans granted by the European Union through the Recovery Fund. However, this decision will depend on whether such loan assistance can be used, by the private sector, via Banco de Fomento, so that it does not count for the purposes of accounting for public debt, according to an official source from the Executive to Business.
According to the outline of the Recovery and Resilience Plan to which the Business had access, and which will be handed over by the Prime Minister, this Thursday in Brussels, the Government admits to using 4,295 million euros of loans on favorable terms to be granted by the EU.
Thus, the Socialist Executive is awaiting a clarification from Brussels to see whether, by using and using these means via Banco de Fomento, it is possible to prevent such loans from counting to aggravate public indebtedness.
In this first draft of the PRR, that amount would be for use in three areas: housing, productive potential and employment and sustainable mobility. 2,745 million euros would be invested in the public park of accessible housing, 1,250 million for the capitalization of companies and financial resilience, and 300 million to acquire railway rolling stock.
If a final agreement between the Community institutions is confirmed, the European Commission will issue a debt in the amount of € 750 billion to be distributed among the Member States between grants (non-repayable) and loans (on favorable terms compared to the market). Portugal will be entitled to 15.3 billion euros in non-refundable funds and 15.7 billion via loans.
If, at an early stage, the Prime Minister argued that it was necessary to “maximize” the use of grants and “minimize” the use of loans, António Costa later came to defend, during the presentation of the PRR’s priorities, that the country could hardly use the credits of the HUH.
“We will not use the loan portion until the country’s financial situation allows it,” he said, referring to the high public debt. Due to the recessive effects of the pandemic and the measures adopted to counteract them, in the proposal for the State Budget for 2021, the Executive estimates that the debt will rise to 133.8% of GDP this year, compared to 117.2% at the end of 2019.
The finance minister, João Leão himself, in the presentation of the budget proposal argued that it is necessary to maintain “rigor in public accounts” in order to avoid a lack of debt control that could jeopardize “access to financing for the Republic on favorable terms”.
However, also this week, António Costa revealed that he is negotiating with the European Commission the possibility of the country resorting to the Next Generation EU loans if they can be used by the private sector, namely through the Banco de Fomento.
For its part, this long-awaited financial entity will start operations at the beginning of next November and is considered by the Government as instrumental in ensuring a more robust response to the current crisis.