Portuguese Deputy Prime Minister Paulo Portas said on Tuesday that the decision to bailout Banco Espirito Santo (BES) was the most "acceptable" option, and that nationalizing the bank would be "a tragedy."
The Portuguese authorities are maintaining an optimistic stance after the Bank of Portugal announced on Sunday that the country's largest private bank would be injected with 4.9 billion euros (6.56 billion U.S. dollars) by the state after a first-half net loss of 3.58 billion euros on Thursday amid accusations of fraud and money laundering.
"Nationalizing (the bank) would mean passing the bill onto the taxpayers," Portas said at a press conference, according to local media reports.
He added that bailing out the bank would protect deposits, the taxpayers and jobs, as well as "avoiding a credit risk when the economy most needs credit."
His comments came amid accusations by opposition party Left block that taxpayers will "pay once more for a bank's mismanagement."
Leader of Left block party Catarina Martins has compared the BES crisis to the case of the bank Banco Portugal de Negocios (BPN), which in 2008 also fell into the hands of the government after debt and management irregularities, saying this time it could be "five times worse."
The government has also been criticized for not commenting on the move after the decision was announced by Bank of Portugal Governor Carlos Costa late Sunday night.
On Monday Portuguese Prime Minister Pedro Passos Coelho broke silence and said that bailing out BES was the "best solution" and that the move had been "favorably welcomed by the markets."
However, the Socialist Party has called for an "urgent" convocation of the Standing Committee of Parliament for the minister of finance to clarify the decision taken.
Minister of Finance Maria Luis Albuquerque will explain the move at parliament on Thursday.
The Socialist Party has also criticized the use of public resources, saying these should be used to contribute to the reduction of the country's public debt.
The nationalization of bank BES came just weeks after the Portuguese authorities had said that there would be no government intervention, and the bank had a comfortable margin.
BES has now been renamed "Novo Banco" (New Bank) and is managed by Vitor Bento after Ricardo Salgado, who was detained last Thursday and released for a sum of 3 million euros, stepped down. Banks in Portugal are working without disruptions and customers are able to carry out operations as usual.