A series of “speculative” interest-rate swap contracts taken out by state-owned companies in Portugal have resulted in a loss of around three billion euros, posing a further blow to the country’s already strained finances and sparking the exit of two high-ranking officials from the government.
Most of the contracts were signed between 2003 and 2009 prior to the arrival of the current center-right administration and affect 15 state-owned companies, among them the firm that operates the subway in Lisbon, which alone faces a loss of 800 million euros.
In a statement released late Monday, the Finance Ministry said a “number of these contracts have problematic characteristics, and rather than being simple risk coverage instruments have highly speculative elements.”
The secretaries of state, Paulo Braga and Juvenal Peneda, who were involved in the management of the company that owns the Oporto subway, were replaced on Monday. No explanation was given for their dismissal.
The swaps were taken out to protect the companies from rises in interest rates, which have subsequently fallen to record lows.
The Finance Ministry is in talks with the banks with which the contracts were taken out – Goldman Sachs, JP Morgan, Deutsche Bank and BNP — to rescind the contracts in the most advantageous way for the government.
The government said it had also launched an investigation to determine who was responsible for the situation.
Prime Minister Pedro Passos Coelho’s government has to cut spending by a further 1.3 billion euros in order to meet its deficit-reduction targets after the Constitutional Court threw out a number of measures included in the 2013 budget.