Gold Magazine June - July 2013, Issue 27 | Page 78

Be
Predictable!
eurozone

By Kyproula Papachristodoulou. Photo by Philippos Christou

F

How successful
has Portugal been
in implementing its
stability programme?
Professor Luis
Campos e Cunha
sees negative and
positive results and
asserts that a key aspect is predictability
and stability in policymaking
76 Gold the international investment, finance & professional services magazine of cyprus

or several days in the wake
of the Eurogroup’s decisions on Cypru
s (on 15 & 25
March), international new
spapers reported
that customers of Portugue
se banks were
feeling extremely nervous.
The banks
experienced
move cash from deposit acc a rush of customers wishing to
ounts into vaults inside the
The European banking sys
banks.
tem was clearly being roc
ked to its
foundations. Trust had bee
n jeopardized. Portuguese
Professor
of Economics Luis Camp
os e Cunha, a former Vic
e-Governor
of the Central Bank of Po
rtugal, confirmed the rep
orts. “The
first Eurogroup decision
had a huge impact on the
Portuguese
people, who lost trust in
the banks. Banks only ope
rate if we
trust them. If we don’t, the
y hav
Campos e Cunha, who wa e no future.”
s in Cyprus in May to add
rd
3 Nicosia Economic Co
ress the
ngress, told Gold that pri
or to the
onset of the global financ
ial crisis the credentials of
the Portuguese banking sector had
been excellent. “However,
the crisis,
subsequent unemployment
and its impact on non-perf
orming
loans as well as the Greek
haircut [Portuguese banks
owned
a sizeable amount of Greek
debt] had a negative impac
their capital ratios.” The
t on
Government’s response wa
s to inject
money into some banks,
though the total amount
did not
exceed €3 billion. “Some
ban
money to the government, ks are already paying back that
” he said, adding, “I presum
e that it
is going to be possible for
these banks to completely
resume to
private funds now.”
The truth is that the whole
of the country’s banking
under pressure as a result
sector is
of the shrinking economy
, rising unemployment and worsenin
g bad debts. Some analys
ts predict
that Portuguese banks ma
y need further government
assistance
in the future.
How can the ECB help eur
ozone governments and the
banking sectors to survive
ir
financial instability and res
tore
confidence? The Portugue
se professor answered in a
simple,
concise way: “What they
have to do now is what the
y have
promised to do. You do no
t need to do much for the
financial
markets, as long as you are
credible.”
“The ECB has promised
to provide liquidity to stre
ssed