Interview with Rui Baleiras, coordinator of the Technical Budget Support Group (UTAO), a group of six experts who helped 230 MPs interpret the country’s budgetary affairs.
Rui Nuno Baleiras was born in 1963 and holds a PhD in Economics from Grand Lisboa University. From 2005 to 2009, he served as the Minister of Regional Development in the first government led by José Sócrates. He coordinated the strategy of using QREN, a European funding framework worth 21.5 billion euros, and implemented his governance model.
Together with economist Teodora Cardoso, he is the co-founder of the Public Finance Committee. Since 2018, he has been the coordinator of the Technical Budget Support Agency (UTAO), which consists of six technical staff who provide special advice to the Portuguese Parliament on matters of the national budget and public accounts. He is one of the leading experts in the field of local public finance in the country and has published many books on the subject.
In an interview with Dinheiro Vivo and TSF, “A Vida do Dinheiro” talked about difficult files, such as Novo Banco, and what is expected to happen in the public accounts in the next few years, which will be strongly marked by the “recovery plan”. And passed the “Stability Pact” and fiscal consolidation. Part 2 of 4 parts.
Let’s stay at the newsstand. The ban on public banks will end in September, but the government is looking for a solution to address some vulnerable companies or sectors, some of which are related to the tourism industry, while others are heavily restricted. This may include providing more state guarantees for loans that are due. What impact can it have on public accounts? Will there be increased risks in the future?
To be honest, I think that because we have gone through the pandemic and the political measures we have taken, and most of them have high ownership, we currently have a lot of debt, that is, the hereditary obligations that the country had previously had due to contingent liabilities. Nature, the number of potential creditors that are difficult to quantify is numerous. For example, credit default itself is not an obligation of the state, because fundamentally speaking, credit default is essentially an agreement between the creditor and the debtor, so there is no obligation to repay the debt within a certain period of time. We know that even from the financial crisis 10 or 12 years ago, it can be found that if a large number of creditors cannot repay their debts, there is a huge risk, which threatens the stability of the financial system. If the problem is systemic, we are taxpayers. We may be asked to let go.
What do you think of this systemic risk, and is there a solution?
I think there is still time for homework. My idea is that planning is better than cure. These are credit defaults, a collective issue, but it is a collective issue that concerns society, but it is important not to eliminate personal responsibility. Whose personal responsibility is this? Among the borrowers, that is, companies and families that require defaulting, banks that allow defaulting, Portuguese financial regulators and European authorities, because of possible measures such as extending the guarantee period. The guarantee period, or some kind of public intervention, must be coordinated at least at the Eurozone level. Therefore, Portugal cannot act in isolation. I hope all these interested parties are planning so that we don’t have to chase losses.
I ask you about this systemic risk, because several presidents of the Bank of Portugal have already explained what might happen next. Paulo Macedo, president of Caixa Geral de Depósitos, talked about the tsunami of bad guys after the moratorium ended. If the country will have to import or strengthen guarantees, what does this mean for medium-term and long-term stability in the context of fiscal consolidation that obviously must exist?