Markets, Business & Tech Briefing: Sarmento Prices the VAT Cuts at Two Billion Euros, Zara's Owner Discounted the REN Sale, Six Bidders Line Up for Azores Airlines

Euronext Lisbon has been shut since Friday evening, so no Portuguese price moved today. The number that did move was a political one. The finance minister spent his Sunday putting a cost on the two tax cuts that Chega and the Socialists both want, and the figure he arrived at, two billion euros a year, is larger than the surplus he expects to have. That is the argument the 2027 State Budget will be fought over, and the first hard evidence in it arrives on Wednesday, when the statistics office publishes what the public accounts actually did in 2025.

Sarmento Puts a Two Billion Euro Price on the Opposition's VAT Cuts and Says They Would End the Surplus

Joaquim Miranda Sarmento, the finance minister, told the Lusa news agency on the margins of the informal Ecofin meeting in Dublin that cutting value added tax on fuel and applying a zero rate to a basket of essential foods would push Portugal into deficit in 2027. Both measures are being pushed by Chega and by the Partido Socialista (Socialist Party), and both bills reach parliament on Thursday.

His arithmetic is the news here, because until now the two parties have proposed the cuts without a published costing. Sarmento put the annual impact at roughly 2,000 million euros: 1,200 million from taking fuel VAT down from 23 percent to 13 percent, and 800 million from zero-rating the food basket. Against that, he said, "there is no budget balance of that amount, of two thousand million euros. On the contrary, it will be much, much lower. It will be positive, it will be a surplus, but much lower." He described the 2027 balance as "demanding" and the room for new measures as "relatively reduced".

The procedural point he made is sharper than the fiscal one. "To approve a proposal like that, they both have to vote in favour," he said of Chega and the PS. "So if they want to form a coalition and approve that, what they are telling the country is that they want there to be a deficit in 2027." Neither party has the votes alone; passing either bill requires the two of them to walk through the same lobby, which is a thing both have spent the year avoiding being seen to do.

On the budget itself he was conciliatory and non-committal in equal measure. The government has "no preferred partner, neither in the budget nor in any law; we negotiate with everyone", and it wants the document passed "because the country needs to have a budget, it cannot go into another political crisis and it gains nothing from being on twelfths", the provisional monthly spending regime that applies when no budget is in force. The 2027 proposal will be "simple", like those for 2025 and 2026, confined to budgetary rules, with anything requiring a change in legislation tabled separately so that parties can vote on it on its own. It is due in parliament by 10 October.

Lisbon Reopens 1.33 Percent Below a Record It Set on Thursday, After a Week That Gained 0.18 Percent

The market that reopens on Monday morning is the one Friday left behind, and it is worth restating the position rather than the drama. The PSI closed on Friday at 9,542.21 points, down 128.90 points or 1.33 percent, having given back all but 1.55 points of the 130.45 it won on Thursday. Fifteen of the sixteen constituents fell and only Mota-Engil rose. We published the full constituent table on Friday, reconciled line by line against Euronext's own closing list.

Two facts survive the weekend intact. Thursday's 9,671.11 is still the top of the 52-week range, so the record stands and the index simply sits 1.33 percent under it. And the week as a whole was positive: from 9,524.73 on Friday 11 September, five sessions produced a gain of 17.48 points, or 0.18 percent, arithmetic recomputed here. A week that contained a record high and a 1.33 percent fall finished almost exactly where it started, which tells you the two big moves were the same money changing its mind twice.

The heaviest names are the ones to watch at the open, because they did the damage. NOS fell 2.36 percent on Friday, BCP 2.24 percent, Jerónimo Martins 2.22 percent and Sonae 2.14 percent, and three of those four are consumer or banking rather than energy. Galp lost only 0.73 percent on a day when crude was falling, which is the third different answer in three sessions to the question of whether Galp trades off oil.

Portuguese Banks Hold 102 Billion Euros of Government Debt, and Three Quarters of It Never Gets Marked to Market

The seven ten-year yields we track have not moved since Friday, because the bond market is shut too. On TradingEconomics country pages read this afternoon and stamped 18 September: Portugal 3.90 percent, Germany 3.52, Spain 4.00, Greece 4.29, Italy 4.44, France 4.57 and the United States 5.00.

One correction to Friday's edition, made here because it is cleaner than leaving it. TradingEconomics has since revised four of those seven by a single basis point: Germany from 3.51 to 3.52, Italy from 4.43 to 4.44, Greece from 4.30 to 4.29 and the United States from 5.01 to 5.00. Portugal is unchanged at 3.90. The effect is that Portugal's spread over the German Bund is 38 basis points rather than the 39 we reported, and the ranking is otherwise identical. Recomputed from the revised levels, Portugal borrows ten-year money 10 basis points inside Spain, 39 inside Greece, 54 inside Italy and 67 inside France.

What is new is a piece of work by Jornal Económico on who in Portugal is carrying that duration. Using Banco de Portugal (Bank of Portugal) data, it puts the Portuguese banking system's exposure to government debt at 20.2 percent of total assets at the end of March 2026. On total assets of 503.9 thousand million euros, that is roughly 102 thousand million euros of sovereign bonds in gross terms. Portuguese public debt specifically accounted for 4.6 percent of assets, which is about 23 thousand million.

The reassuring half of the story is an accounting choice. The component classified at amortised cost is 15.0 percent of total assets, roughly 75.6 thousand million euros, or about three quarters of the whole exposure. Bonds held that way are not revalued daily; a loss only materialises if the bank sells the asset or recognises an impairment. Only a residual slice sits at fair value, where price moves hit earnings or capital directly. With the American ten year above 5 percent for the first time since 2007 and the sell-off spreading to long euro area maturities, that distinction is doing a great deal of work.

Fitch told the paper it expects "very low direct exposure" to US Treasuries, Japanese government bonds and gilts, and "naturally, greater exposure to French, Portuguese, Italian and Spanish securities (and probably lower to German ones)", but that "the impact on banks' equity is limited by the accounting method used". On the fair-value slice, it expects capital ratio sensitivity to sovereign spreads to be "low and manageable". The caveat both Fitch and Moody's attach is the same one: losses would become real if banks were forced to sell for liquidity reasons, a scenario Fitch calls "remote given the ample deposit base and abundant liquidity". That is a conditional worth remembering rather than a warning.

The Euro Ended a Seven Session Losing Run Nowhere, and Friday's Euribor Went Both Ways

The European Central Bank does not publish reference rates at the weekend, so its 18 September fixing is still the live number: the euro at 1.1460 dollars, down from 1.1481 on Thursday, and at 0.85880 pounds. That was the seventh consecutive daily decline against the dollar, a run of 1.65 percent from 1.1652 on 9 September, and it is the longest unbroken sequence of falls in the ECB's 90-day file. Monday's fixing is the first chance to break it.

Friday's Euribor fixings published on Saturday morning, and unlike Thursday's they did not all move in the borrower's favour. The twelve-month rate fixed at 3.343 percent, down a fifth of a basis point, and the three-month at 2.620 percent, down 1.3 basis points. But the six-month rose 1.6 basis points to 2.978 percent, and the one-week rose fractionally to 2.357 percent. The one-month eased to 2.473 percent.

Portuguese variable-rate mortgages reprice mostly off the six and twelve-month fixings, so this is a split result: the longer of the two helped, the shorter did not. Zoom out and the week is still unfriendly. At 3.343 percent the twelve-month rate is about 18 basis points above where it fixed on 11 September, which is most of the damage done by Monday's sharpest single-day rise since March still sitting there.

Crude finished the week lower. On TradingEconomics, Brent is at 103.87 dollars a barrel, down 0.91 percent on Friday, and the West Texas contract at 100.30 dollars, down 1.58 percent. Brent is 0.71 percent lower than a month ago and 13.37 percent higher than a year ago, which is the first time in several weeks that the monthly comparison has turned negative.

Project Nascente: Zara's Owner Asked for a Premium of Up to 20 Percent, Settled for 15, and Saved the State 15.6 Million

The best corporate story of the weekend is a set of documents rather than an announcement. Jornal Económico has read the file on the state's repurchase of 13.7 percent of REN (Redes Energéticas Nacionais, the electricity and gas transmission operator), lodged with the Tribunal de Contas (Court of Auditors) as part of the sale process, and it shows how the price was actually set. The operation had a code name: Projeto Nascente.

The seller was Pontegadea Inversiones, the investment vehicle of Amancio Ortega, the Galician founder of Zara. On 6 August 2026, Andres Moreno Fernandez, Pontegadea's head of infrastructure, wrote to Joaquim Cadete, president of Parpública, the state holding company, with the proposal that became the deal signed on 14 August. Pontegadea would proceed on the basis of whichever was higher: the average share price over the six months to the day before signing plus a premium of 15 percent, or a flat 4.25 euros a share.

The letter also conceded ground without explaining why. "Bear in mind that our initial proposal in terms of premium (between 17 percent and 20 percent) was somewhat higher than what we are now proposing," Moreno Fernandez wrote. He justified asking for a floor price on timing grounds: "We do not have visibility on the exact date when the agreement will be signed because it will depend on when you have the internal approvals. Considering the uncertainty in timing, we need our board's approval with a minimum price."

In the event the flat 4.25 euros was the higher of the two limbs and set the price, at a total of about 390 million euros; the six-month average plus 15 percent would have come out near 389 million. Had the original 20 percent premium survived into the final terms, Jornal Económico calculates the state would have paid 15.6 million euros more than it did. Readers should hold one small discrepancy in mind: the government's own figure for the transaction, which it set out yesterday in answer to a front page, is 389 million euros, and the paper uses 390 million in this piece and 389 million in another published the same day. Counting the dividends he collected along the way, Ortega leaves REN with 462 million euros.

The document dump also answers a question the government has been asked repeatedly, which is why it negotiated directly instead of buying in the market. CaixaBI, one of the two advisers whose 100,000 euro fee we covered yesterday, estimated that acquiring a 13.7 percent stake on the open market would take between 570 and 730 days of trading, because REN's shares are too illiquid to absorb a purchase that size. Pontegadea declined to comment on the story; the Finance Ministry and Parpública did not answer the paper's questions.

The sequel is already visible. The government has said it wants up to 20 percent of REN, which leaves it 6 percent short. If it again prefers a direct negotiation to the market, the counterparties available are Spain's Redeia and Masaveu, with 5 percent each, and China's Fosun through Fidelidade, also with 5 percent. Any one of them now knows exactly what the last seller got.

Six Bidders Have Until Monday to Put a Euro Figure on Azores Airlines

Monday is the deadline for non-binding offers in the privatisation of Azores Airlines, the SATA subsidiary that flies the international routes and the links between the islands and the mainland. SATA Holding received eight expressions of interest; six met the requirements in the tender documents and were invited to go further. ECO reports that the profile of the interested parties is varied, taking in airlines, financial investors and companies connected to the sector, Portuguese and foreign.

This round is where the process stops being abstract. Candidates are bidding for at least 75 percent of the company, and for the first time their submissions must contain a financial proposal naming a price in euros for the shares. Everything before this was interest; this is a number.

The sale is not a choice. It was a commitment in the restructuring plan the European Commission approved in June 2022 as the condition for the state aid the group received, which came to 453.25 million euros in total. The commercial backdrop is that Azores Airlines trimmed its half-year loss to 37.1 million euros, with fuel alone taking back 11.5 million of the improvement. Whoever bids on Monday is bidding on an airline whose largest single cost is the thing the war in Iran keeps repricing.

Coimbra Will Be One of the First Councils to Run Building Permits Through Artificial Intelligence

The government will start pilot projects this year in a small group of municipalities to test the use of artificial intelligence in urban planning permissions. Gonçalo Matias, the Ministro-Adjunto e da Reforma do Estado (Minister-Adjunct and Minister for State Reform), told reporters in Coimbra that the pilots will run in a "relatively small number" of councils already well equipped technologically, and that Coimbra is one of them. He was speaking after the launch of an artificial-intelligence training programme for the public administration at the city's iParque.

The timing is tied to a law. On 1 October the new Regime Jurídico da Urbanização e Edificação (RJUE, the legal regime for urbanisation and building) comes into force, and it already provides both for licensing to be done electronically and for the process to draw on artificial intelligence. Matias was careful about what the technology would be: not a replacement for the platforms councils already run, but "a layer" sitting above them, functioning as "a single point of entry that will allow people to handle all their licences" in one place. Construction permits come first, with industrial and environmental permits added later.

The target he named is 50 days to license building works, and the ambition is to extend the system to every municipality in 2027. "When we have it all joined up, if someone wants to build a factory here in Coimbra, they can obtain the construction, environmental and industrial licence at this single point of access," he said. "If all of this can be done, as I hope, in a few months, we are talking about a real transformation, a revolution in the way licensing is obtained in this country."

He was equally clear about where the decision stays. The technology speeds the process without replacing the human: whoever decides on a planning permission is still the mayor, or the councillor to whom the power has been delegated. Ana Abrunhosa, the mayor of Coimbra, made the same point from the other direction, welcoming the acceleration but adding that "artificial intelligence cannot be a pretext for dehumanising", and arguing the gain should be to free municipal staff for face-to-face service. This is a narrower and more concrete use of the technology than most government announcements about it, and it lands two weeks before a separate licensing code that is still being drafted.

Big Tech Has Written 300 Billion Dollars of AI Guarantees, and Most of Them Are Not on Any Balance Sheet

The largest technology story of the weekend is a financing structure. The big technology companies have taken on up to 300 thousand million dollars in guarantees to fund artificial-intelligence infrastructure, and are keeping most of that exposure off their balance sheets, according to the Financial Times, reported here via ECO. (The Portuguese coverage headlines the figure as "300 biliões", which in Portuguese means 300 million million; the body of the same report says 300 thousand million dollars, and that is the number the underlying reporting supports.)

The mechanism is simple enough to describe and hard to see from the outside. Standalone vehicles issue the debt that pays for data centres and chips. The technology companies do not issue that debt; they guarantee a minimum future value for the assets behind it. That puts their credit quality at the service of the borrowing without the liabilities being fully recognised in their own accounts, and it lets the vehicles borrow at something close to the rate the sponsors themselves would pay.

The named examples give a sense of scale. Meta debuted the structure at a data centre in Louisiana with a 28 thousand million dollar guarantee. Broadcom took on 29 thousand million of exposure in financing chips destined for Anthropic. Nvidia extended 105 thousand million in guarantees to SB Energy to support an OpenAI data centre in Ohio. Morgan Stanley counts more than 3.1 million million dollars in off-balance-sheet commitments and credit support across seven large technology companies and chipmakers, and the rating agencies have already begun adjusting their debt measures to capture part of it.

The risk is not exotic. It is that the sponsors absorb the losses if the assets fall in value, whether through chips becoming obsolete, through too much capacity being built, or through demand for artificial-intelligence services coming in below what was assumed. For readers here the relevance is indirect but not small: the technology trade is what has carried European indices through a year of rate rises, and Portugal is currently trying to attract exactly this kind of capital, with a deep tech cohort in Porto and a Sines bid for an EU gigafactory due in November.

The Week Ahead

Lisbon reopens at 08:00 on Monday, the same day the Azores Airlines bids are due. Tuesday brings the euro area's flash consumer confidence reading at 15:00, which stood at minus 15.5 in August after minus 15.9 in July, a fourth consecutive monthly improvement and the highest since February; the prime minister rings the closing bell at the New York Stock Exchange the same afternoon.

Wednesday is the one to mark. At 11:00 the Instituto Nacional de Estatística (INE, the statistics institute) publishes the second Excessive Deficit Procedure notification of the year, the return every EU member state must file with Eurostat before 1 October. It carries the final 2025 general government balance and debt, with revisions, and updated estimates for this year. April's first notification put 2025 at a surplus of 0.7 percent of GDP, or 2,058.6 million euros, with gross debt at 89.7 percent of GDP, and carried a Finance Ministry forecast of a 0.1 percent surplus for 2026. Whether that 0.1 percent survives contact with the IRS cuts and the pensioner supplement announced since is the number to look for, and it is the same number Sarmento was defending today. The global flash PMIs land the same day, with Deutsche Bank looking for US manufacturing near 54.0 against 53.9 in August and services easing to 56.1 from 56.5.

Thursday carries three things at once: the two VAT bills reach parliament, Xi Jinping arrives in Washington for a three-day visit and a second summit with Donald Trump, and INE publishes August bank valuations for housing at 11:00. On that last one a caution is in order. ECO's own preview cites two different July medians, 2,240 euros per square metre described as a record and up 15.2 percent on the year, and 2,627 euros per square metre up 16.5 percent, without distinguishing what each covers, so we are giving the date rather than picking one. The regional figures in the same preview are internally consistent: Greater Lisbon at 3,469 euros per square metre and the Algarve at 3,010 at the top, the Centro at 1,739 and the Alentejo at 1,778 at the bottom. Friday closes the week with the University of Michigan's final September sentiment and inflation expectations, whose preliminary reading had one-year expectations at 4.6 percent, up from 4.0 percent in August.

The single thing most likely to move Lisbon on Monday is none of the above. It is whether the euro breaks its seven-session losing run against the dollar, because that run, not anything domestic, is what has been setting the tone in Portuguese bonds for a fortnight.