Portugal to take two banks to court over swap deals
Portugal said Friday it will take banking giants JP Morgan and Santander to court to make them renegotiate deals that have left state-run companies paying hefty interest rates.
Treasury Secretary Maria Luis Albuquerque said the government had failed to reach a deal with US bank JP Morgan and Spanish bank Santander’s local unit to overhaul so-called “toxic swap” contracts that are weighing down public companies and threatening Portugal’s debt-slashing efforts.
“It has not been possible to reach a deal” after two months of negotiations, she told a press conference.
“The government will defend the taxpayers’ interests in court.”
The finance ministry said earlier this week that it had found state-run firms were facing some three billion euros ($3.9 billion) in losses caused by “highly speculative” financial deals signed in recent years.
The deals involve swaps that have pushed up the interest rate on some loans to 20 percent.
The finance ministry blamed the deals on the former socialist government, ousted by current Prime Minister Pedro Passos Coelho’s centre-right coalition in June 2011.
The discovery was a serious blow to the small eurozone country, which is already scrambling to meet the austerity conditions linked to a 78-billion-euro bailout.
Luis Albuquerque said some banks had agreed to renegotiate the contracts, enabling the government “to save 170 million euros in interest in the coming years”.
Three other banks have asked to extend negotiations to next week, she added.