The Deputy Secretary of State for Finance, Ricardo Mourinho Félix, and Finance Minister Mário Centeno were under pressure today to explain why Portugal’s taxpayers are funding interest rates of up to 200% payable to the Spanish-owned bank, Santander Totta.
The ‘swaps’ contracts, entered into by the management of some of Portugal’s publicly owned transport companies including Metro do Porto, Metro de Lisboa, Carris and Sociedade de Transportes Colectivos do Porto, have current interest rates of 112%, 106% and 103%, with others at 50% and 30% interest.
Ricardo Mourinho Félix said these sorts of interest rates charged by the bank to public companies have reached levels that anyone sane would consider "unacceptable," adding that there is nothing that can be done as the contracts have been validated twice in court in London.
The Budget and Finance Committee members resisted forecasting the future of the swaps contracts interest rates but they should reach at least 165%, and may well hit 200%.
Mourinho Felix, faced with repeated questions about the level of interest charged by the Spanish bank, admitted that "no normal human being thinks it acceptable to pay 200% interest" in any contract.
"These are not normal, these are not acceptable," said Mourinho Felix, adding that these swaps have been accruing interest on interest since 2009, with three of these contracts currently hitting more than 100% and they will continue to accrue interest in the coming years.
Mourinho Felix said that the former Finance Minister, Maria Luís Albuquerque, wanted to tear up the contracts:
"At the time, in an ill advised gesture, the Minister of Finance said publicly, with conviction, that she would rip up the contracts. And Santander Totta did what most sensible people would do: it announced that it was going to court to have the contracts validated, which it why it all ended up in London."
Maria Luís Albuquerque ordered that interest payments be halted, which caused more pain after the deals were judged valid in a London court and accumulated interest was added back into the amounts owed.
The swaps contracts will burden taxpayers until the last one runs out in 2027. Mourinho Felix told MPs that there currently is about €500 million interest due from 2013, plus a further €1.3 billion in future interest payments, until the bitter end of the contracts.
Asked whether he agreed to these extortionate interest rates, Mourinho Felix said he did not need a "sanity test," since "anybody mentally healthy knows that these rates are extremely high.”
António Vieira Monteiro, the chief executive of Santander Totta, was asked in April if he was comfortable with charging such high interest to Portugal's fiscally exhausted taxpayers.
Monteiro replied that this was not his role, "I do not have to be comfortable or not," he said, thus removing his name from many Christmas Card lists.
António Vieira Monteiro, possibly the greediest banker in Europe
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See also: 'Portugal must pay €1.8 billion in Santander swaps case ruling' (March 2017)
'Santander confirms that 'swaps' sky-high interest rates continue as before' (April 2017)
