Bank of Portugal Director: No Discussion at Level of Europe About Extending Government Support
1 July 2021
By David Barwick – FRANKFURT (Econostream) – All discussions in Europe about pandemic-related government support concern the withdrawal of this support, reflecting the better-than-expected evolution of the economy, Bank of Portugal Luís Laginha de Sousa said Thursday.
In an interview with Portuguese daily Jornal de Negócios, Laginha de Sousa, in charge of financial stability at the central bank, said that ‘[t]he right way has to be found to deal with the difficult consequences’ of the end of pandemic-related loan moratoria for ‘companies, households and the financial sector, and to gradually withdraw support, so that it only exists for the necessary cases, during the necessary period.’
However, he stressed, Portugal is part of the Eurosystem and as such ‘cannot appear as a country out of line with the guidelines for other countries.’ Looking around Europe, he said, ‘what we see is that most, if not all, of our counterparts have assumed that we are coming out of the crisis and, therefore, there is no room for backtracking or extending support.’
He continued: ‘We are in a time of withdrawal of support. It is in this context that measures must be taken, otherwise we will be out of line.’
There is no discussion at the level of Europe ‘in which the extension of the measures is on the table’, he said. ‘All discussions are withdrawal. Because all economic data are more positive than the projections that were made, whether in the central scenario, whether in the adverse scenario and, even, sometimes, in the more benign scenario.’
As for an increase in NPLs when moratoria are ended, Laginha de Sousa conceded that some companies will prove unviable and unable to repay their loans. Others, despite difficulties, will be viable but require support, he said. ‘It is to these cases that efforts should be directed’, he said.