Toxic Swap: Portugal to take two banks to court

The discovery was a blow to the small euro-zone country.

LISBON: 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.

The finance ministry said earlier this week that it had found state-run firms were facing some €3 billion ($3.9 billion) in losses caused by “highly speculative” financial deals, which have pushed up the interest rate on some loans to 20%, signed in recent years.

The finance ministry blamed the deals on the former socialist government. The discovery was a serious blow to the small euro-zone country, which is already scrambling to meet the austerity conditions linked to a €78 billion bailout.

Published in The Express Tribune, April 28^th, 2013.

Like Business on Facebook to stay informed and join in the conversation.