EU: Portugal and EC agree on 5 billion euro recapitalization for ailing bank

The European Commission and Portugal have agreed in principle on the recapitalization, on market terms, of ailing state-owned bank CGD, envisaging an injection of up to 2.7 billion euros in state funds and nearly as much in debt and equity.

Portugal is still reeling from two bank rescues in 2014 and 2015 that have undermined investor confidence. Caixa Geral de Depositos, or CGD, its largest bank by assets, needs to bolster its capital because of massive bad loans on its books.

The government has been negotiating with Brussels for months so that any injection is not considered state aid and does not count towards the budget deficit, which Lisbon has promised to cut to 2.5 percent of GDP in 2016 from last year’s 4.5 percent.

“This is an innovative deal in Europe…This is good news not only for CGD but for the whole Portuguese banking system,” Finance Minister Mario Centeno told a news conference, adding that he expected that there would be no impact on the deficit.

Full Content: Metro News

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