Tales from a House of Cards

by Andrew Stuttaford

 This headline on Bloomberg News yesterday caught my eye:

 (BN) Espirito Santo [a Portuguese bank] Issues 3-Year Debt Guaranteed by Portuguese State.

 What could possibly go wrong with that?

 Meanwhile, Reuters is running this story today:

One of Portugal’s most prominent business leaders has moved his family holding company to Holland partly because of uncertainty over whether the country will remain in the euro, Alexandre Soares dos Santos said in a newspaper interview on Saturday. Soares dos Santos, who is chairman of the board of Jeronimo Martins, caused a stir in Portugal this week when it emerged that his family holding company that controls the country’s second largest retailer had moved to Holland.

 Soares dos Santos told weekly Expresso the decision to move the holding company, which holds 56 percent of Jeronimo Martins, was motivated by a desire to guarantee investments and avoid “fiscal instability” in Portugal. But it was also because of uncertainty over Portugal’s continued existence in the euro.

“I also don’t know if Portugal will stay in the euro. And if it leaves, it will be to the escudo,” Soares dos Santos told Expresso, referring to the escudo currency used by Portugal before it adopted the euro. “I have a right to defend my property.”

Asked if the transfer had to do with the risk of leaving the euro, Soares dos Santos said: “Clearly. Since 2008 our economic consultants have talked about this.”

Jeronimo Martins has been one of Portugal’s most successful companies in recent years after having built up a large business in Poland, where it is now the biggest food retailer. Portugal is currently going through tough austerity under a 78-billion-euro bailout by the European Union and IMF which has sent the country into its deepest recession in decades.

Soares dos Santos said the decision to move the holding to Holland had also been motivated by lack of financing by Portuguese banks, which have been hit hard by the euro zone debt crisis.

 And if too many others follow dos Santos’s lead, and not just in Portugal, what then?


The Corner

The one and only.