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Portugal’s Top Oligarch Goes Down in Flames


Ricardo Espírito Santo Silva Salgado is known in Portugal as “Dono disto tudo,” or “Owner of everything.’ The oligarch’s family has been calling the shots in Portugal for over a century. It’s the largest shareholder of the country’s biggest stock market listed bank, and controls a string of other financial companies, agricultural, energy, health care and property companies in Portugal and across the globe. But now it looks like the final chapters in the long history of the most renowned members of the country’s elite are about to be written. And perhaps with it a new chapter in Portugal’s and Europe’s financial and economic crisis.

Last week Ricardo Salgado, now aged 70, was arrested. He was detained – later released on bail for €3m – in connection with a long-running investigation into money laundering and tax evasion. Ricardo Salgado’s arrest didn’t come about of nowhere. The Espírito Santo family has been under “intense scrutiny” since earlier this year when an audit ordered by the central bank discovered accounting irregularities at the Luxembourg-registered holding company ESI.

With ESI and its 100%-owned Rioforte now preparing for bankruptcy, the country’s President Anibal Cavaco Silva has admitted that the failure could be systemic: “We cannot ignore that there will be some impact on the real economy,” he said, providing a rather darker forecast that most of the experts quoted in the press with soothing words such as “contained” and “priced-in.”

The central bank has intervened, ejecting Mr Salgado and barring the family from further involvement in the management of Banco Espírito Santo; this followed loss of control of the bank after a €1bn capital increase to shore up the banks finances, even if the family remains the largest single shareholder.

But the repercussions go much further than the Espírito Santo clan – different branches of which apparently descended into infighting as members used their influence to take out loans, even after regulators in Portugal and Luxembourg started their investigations.

Although calmed somewhat in recent days, the Lisbon stock market has been in spasms since one of the companies controlled by the Espírito Santo family missed a rather large payment on its short-term debt. The country’s corporate world has been rocked too. Tied to the bank through cross shareholdings, Portugal Telecom has run into trouble with a planned merger with Oi, operator of one of Brazil’s biggest wireless networks, after the Espírito Santo family failed to repay more than $1bn it owed to the telco.

Elsewhere across the globe the ripple effect of the Espírito Santo group’s woes are being felt too – from Panama, where financial authorities have taken control of a teetering bank, to Angola where the central bank has warned of bad debt risks at one of the country’s most active lenders.

For Spanish financial journalist and economist Marco Antonio Moreno the crisis of Portugual’s top bank is ‘just the tip of the iceberg’. He writes: “Banco Espírito Santo’s  problems are long-standing and the financial gymnastics between holding companies is well known to investors. They wager that the European Central Bank will always step in and inject money, after which they start a run, leaving the bank in an even worse position. This is just the tip of the iceberg and there are more banks in [Europe in] a precarious situation: a financial tsunami could be unleashed…”

This is not the first time it appeared to be touch and go for Portugal’s answer to the Rothschilds. In 1974 the Carnation Revolution that cast aside four decades of dictatorship also nationalised most of the Espírito Santo family’s assets. But following the abrupt end to the radical popular revolt and the country’s integration into of the EU and Nato, the family empire was restored.

To be sure, reprivatising large parts of the economy and handing it to crony capitalists all those years ago seemed to work wonders for most Portuguese. Living standards rose and the economy did well after joining the western capitalist-military bloc, even if the 1% and 0.01% richest did far better than the rest. Today though, after Salgado and his banking mates in New York, Frankfurt, London and Paris sent the world economy plunging in 2008, and three years on from the Troika marched in the good times seem a distant memory.

Last week Lisbon’s right wing government reiterated its determination – despite a previous plan being thrown out by the Constitutional Court – to once again cut pensions and the wages of public sector workers to pay off international creditors under the Troika’s hated Memorandum.  This after wages have already been slashed by 5% between 2010 and 2013, and advances from the Revolution, like universal free healthcare, have been drastically reversed, with swingeing cuts and creeping privatisation.

Like ten digit corporate welfare cheques, public spending cuts are good for the nation. But PM Pedro Passos Coelho assertions that there’s still life in the corpse after this austericide appear exaggerated. Unemployment, though falling from a high of 16.3% to 14.9% by March 2014, remains well below the single-digit levels that were the pre-crisis norm. Rosy predictions of an economic rebound were dashed last month when figures showed GDP actually contracted 0.7 in the first quarter. Government debt, meanwhile, is at a record 129% of GDP.

So it’s tough for most Portuguese and neither those in power nor indeed Ricardo Salgado and his loved ones are helping, even if the Espírito Santos feel they are now falling on hard times.

They clearly won’t be suffering materially in the way most of their co-nationals would understand. But they may have to accept moving aside to allow for new members of the ruling class. Family banking is a minority sport in Europe, with just a handful of families with any sizeable influence today. Nor is there the need a national big bourgeoisie that the Espírito Santo dynasty provided for over a century, thanks to the demolition of ‘protectionist’ walls, knocked down in the name of free market competition, to the advantage of the stronger and larger economies like France and above all Germany and their corporations.

It was France’s giant Crédit Agricole, still a big shareholder in Banco Espírito Santo, that helped Salgado’s family back into Portugal after their temporary exile in the 1970s in Latin America (where they no doubt wined and dined with the generals, just as earlier generations of family patriarchs did with dictator Salazar at home). Today’s neo-liberal globalisation rules means there’s nothing stopping Crédit Agricole or Deutsche Bank swallowing up the country’s banking sector.

This isn’t Portugal’s first banking scandal, even if it turns out to be the biggest. The most recent examples are playing out in investigations and trials of BCP and BPP top executives on charges that included falsifying accounts, money laundering and fraud. All this occurring under the stewardship of socialist and right wing ministers, top civil servants and the most senior officials of the Bank of Portugal, many of whom were at one time or other senior bankers themselves, or looked forward to a career in banking after quitting politics.

Banco Espírito Santo is yet another scandal that starts with officially sanctioned promiscuity between political, institutional and financial power that saw billions in state handouts to Portugal’s banks, vast dividend pay outs and double digit pay rises for millionaire top execs who would be in jail now if justice existed. To date, though, few if any of Portugal’s banksters are behind bars. As is the rule in any country where big money is in charge, the law for white collar crime is skewed to the wealthy who can easily afford the best lawyers, bail cash or damages to keep them out of jail.

In the end Big Banking – propped up by mega bail outs and Mario Draghi’s free money, as well as his promise that whatever crap (eg dodgy Portuguese bonds) they buy the European Central Bank will happily but it back off them – will come out of this mess just fine. And the people will keep paying. Until they decide, collectively, they’ve had enough.

Tom Gill edits Revolting Europe.

Tom Gill edits Revolting Europe.

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