As we note in today’s dead-tree edition of the FT, the European Commission is out with its latest assessment of Portugal’s €78bn bailout. But buried in the report is a two-page box that raises the intriguing question of whether the bailout is actually bigger than leaders have disclosed.
In its small print, the box – soporifically titled “Euro Area and IMF Loans: Amounts, Terms and Conditions” – makes pretty clear that Portugal’s bailout will actually be closer to €82.2bn (we’ve posted the box here). Elsewhere, another table (posted here) says it’s actually €79.5bn.
Why the sudden increase? About €1.8bn of the rise is pretty straight forward. The International Monetary Fund, which is responsible for one-third of the total bailout funding, doesn’t pay its bailout aid in euros. Instead, it uses something called Special Drawing Rights, or SDRs, which have a value all of their own.
Because an SDR’s value fluctuates based on a weighted average of four currencies – the euro, the US dollar, the British pound and the Japanese yen – the 23.7bn in SDRs that was worth €26bn when the Portuguese bailout was agreed last year is now worth about €27.8bn, meaning Lisbon gets more cash just because of the currency markets.