The president of the Business Confederation of Portugal (CIP), António Saraiva, has identified the elephant in the room, estimating that nonperforming loans in Portugal’s economy stands at €20 billion.
Saraiva referred to bad loans held by banks and said Portugal is “sitting on a time-bomb.”
António Saraiva says that the serious impact of around €20 billion in bad debts can be eased if companies are able to extend repayment deadlines or turn their debts into capital.
If action is not taken and banks and the State do not address the situation, companies eventually will die, “If they die this will cause more unemployment. We are sitting on a time-bomb," says the president of the Business Confederation of Portugal.
António Saraiva commented that about 80% of company loans are from banks, “We must change this situation. This has to do with banks being prepared to accept the challenge," demanding that debts are swapped for equity.
Saraiva criticised the lack of government action over the reduction of its expenditure, but nevertheless claims that the European Commission will just destabilise Portugal if it applies sanctions to Portugal for failure to fulfill its budgetary goals.
Spain has invested €59 billion in Portuguese banks and in an interview with Jornal de Negócios, António Saraiva says that this globalisation has weakened domestic industry and proposes that it is reversed.
"We are on the threshold of a new industrial reality and have activity in sectors such as textiles, footwear, food processing and others that can be reviewed and repositioned so that we have an opportunity to restructure and reindustrialise" says Saraiva recalling that the Business Confederation of Portugal has an ongoing ‘Industrial Policy for the C21st’ project to validate ideas for industrial innovation.
Many of the Portuguese banks’ bad loans are rooted in the property sector where selling off assets at their below book value would crystalise bad debts and create real losses.
Many banks therefore sit on huge repossessed property portfolios, caught between selling at a loss or continuing to live in cloud-cuckoo land with non-existent asset values propping up their balance sheets.
For commercial loans, Saraiva is calling for banks to swap loans for equity and take the pressure off its customers while they rebuild and hopefully prosper without having assets seized and bank accounts frozen.
