Opinion of the European Central Bank of 12 November 2010 on the Banco de Portugal’s staff remuneration and the budget (CON/2010/80)
Date: 2010-11-12
Institutions: European Central Bank
Subjects: Portugal, central bank, national law, pay cut

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 12 November 2010 

on the Banco de Portugal’s staff remuneration and the budget 

(CON/2010/80) 

Introduction and legal basis 

On  25  October  2010,  the  European  Central  Bank  (ECB)  received  a  request  from  the  President  of  the 

Portuguese Parliament for an opinion on several provisions of the draft law containing the annual State 

budget proposed by the Government for 2011 (hereinafter the ‘2011 draft budget law’). Once approved, 
such provisions will apply to the whole public sector, including the Banco de Portugal (BdP)1. 

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 

Functioning of the European Union and on the third indent of Article 2(1) of Council Decision 98/415/EC 

of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft 
legislative  provisions2,  as  the  2011  draft  budget  law  relates  to  the  BdP.  In  accordance  with  the  first 

sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council 

has adopted this opinion. 

1.  

Purpose of the 2011 draft budget law 

1.1  The  2011  draft  budget  law  contains  exceptional  austerity  measures,  mostly  focusing  on  tax 

increases and public spending cuts. The Portuguese Government deems these measures necessary 

for  the  progressive  stabilisation  of  public  finances,  which  it  proposes  to  achieve  through  the 

reduction of the budgetary deficit to 4.6 % of GDP in 2011.  

1.2  The  planned  measures  are  not  only  aimed  at  restoring  the  budgetary  balance  but  also  Portugal’s 

reputation in the international community, thereby ensuring the regular financing of the economy 

and the sustainability of social policies. The measures will apply without exceptions and supersede 

all  currently  applicable  lex  specialis  regimes,  collective  bargaining  agreements  and  individual 

employment contracts. 

1.3  The  draft  provisions  on  which  the  ECB  is  consulted  will  directly  affect  the  BdP  from 

1 January 2011 in the following ways:  

1  

2  

Pursuant  to  Article  2(1)  of  Law  No  3/2004  of  15  January  on  public  institutes,  the  BdP  is  part  of  the  indirect 
administration of the State. See also paragraph 3.1 of this Opinion. 
OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
                                                 
(a)   Article 17 introduces a progressive reduction rate up to 10 % on the excess amount of gross 

total  monthly  remunerations  above  EUR  1  500  earned  by  staff  and  members  of  decision-

making bodies;  

(b)   Article  20  introduces  the  same  reduction  rate  to  the  amount  paid  to  any  person  under  a 

service  provision  contract.  The  conclusion  or  renewal  of  such  contracts  requires  the  prior 

authorisation of the Ministry of Finance. Failure to obtain authorisation could mean that such 

contracts are declared void;  

(c)   Article  22  prohibits  the  BdP  from  awarding  its  staff  or  managers  any  salary  increases, 

performance-related  bonuses  or  cash  payments  of  a  similar  nature.  In  addition,  the  BdP  is 

prohibited  from:  (i)  opening  procedures  for  promotion  to  specific  positions  and  it  must 

suspend  any  such  ongoing  procedures,  (ii)  granting  any  seniority-based  automatic  career 

progression, and (iii) undertaking career restructuring or reclassifications, until 31 December 

2011 at the earliest. Acts carried out in breach of the above will be void and will result in the 

persons responsible for such acts incurring civil, financial and disciplinary liability;  

(d)   Article 25 prohibits the BdP from hiring or recruiting any new staff, regardless of the type 

and duration of the employment relationship, unless exceptionally justified by a significant 

public interest. In such case, the BdP is to provide information on recruitment on a quarterly 

basis to the Minister for Finance.  

1.4 

In addition, the 2011 draft budget law caps the amount of the meal allowance, prohibits the award 

of variable performance-related pay to managers and officers and imposes a tax surcharge of 10 % 

on any pension payments by the BdP exceeding EUR 5 000 per month. 

2. 

General observations  

2.1  The ECB understands and very much welcomes that the 2011 draft budget law is intended to serve 

the purpose of reducing public expenditure.  

2.2  The  President  of 

the  Parliament  has  requested 

the  ECB 

to  deliver  an  opinion  by 

12 November 2010. The ECB notes that, in cases of particular urgency which do not allow for the 

normal consultation period, the consulting authority may indicate such urgency in its consultation 

request and ask for a shorter deadline for the adoption of the ECB’s opinion. However, even though 

the ECB welcomes this consultation request and understands the need for an accelerated legislative 

procedure,  it  would  have  appreciated  being  consulted  by  the  authority  preparing  the  draft 

legislation at an earlier stage.  

2.3  Article 4 of Decision 98/415/EC requires Member States to ensure that the ECB is consulted at an 

appropriate  point  in  time  to  allow  the  consulting  authority  to  take  its  opinion  into  consideration 

before deciding on the substance of the draft legislative provisions. The ECB therefore expects that 

the consulting authority will take any additional measures necessary to reflect the ECB’s opinion to 

the  extent  appropriate.  It  also  encourages  further  consultation  on  any  new  amendments  to  the 

adopted  law  or  any  related  implementing  measures  which  fall  within  its  field  of  competence, 

2 

 
provided  that  such  measures  do  not  merely  constitute  the  implementation  of  the  ECB’s 

recommendations. More generally, internal administrative procedures should be in place to ensure 

that timely consultation of the ECB is taken into account whenever such consultation is mandatory. 

3. 

Specific observations 

3.1 

Scope of the draft legal provisions 

3.1.1  In the absence of an express exemption, the provisions apply to the BdP and to its Pension Fund3, 

even though they are not specifically mentioned. Since the BdP is statutorily classified as a public 
institution governed by a lex specialis4, it simultaneously falls within the corresponding category of 

addressees foreseen in Article 17(9)(q) and (s) of the 2011 draft budget law. 

3.1.2  For  this  reason,  the  spending  cuts  and  additional  fiscal  surcharges  on  salaries  and  pensions 

provided  in  the  2011  draft  budget  law  will  directly  affect  the  members  of  the  BdP’s  decision-

making bodies and its staff. 

3.2  Central bank independence 

The 2011 draft budget law has implications for central bank independence, in particular financial 

and institutional independence, as well as the personal independence of the members of the BdP’s 

decision-making bodies. 

Financial independence 

3.2.1  The concept of financial independence is assessed from the perspective of whether any third party 

is  able  to  exercise  either  direct  or  indirect  influence,  not  only  on  the  performance  of  a  national 

central  bank’s  (NCB)  tasks,  but  also  on  its  ability,  both  operational  in  terms  of  manpower  and 
financial in terms of appropriate financial resources, to fulfil its mandate5. As stated in the ECB’s 
convergence reports6 and several ECB opinions7 on issues concerning autonomy in staff matters, as 

provided  for  under  Article  130  of  the  Treaty,  a  Member  State  may  not  impair  the  ability  of  its 

central bank to employ and retain the qualified staff necessary to perform independently the tasks 

conferred  on  it  by  the  Treaty,  the  Statute  of  the  European  System  of  Central  Banks  and  of  the 

European Central Bank (hereinafter the ‘Statute of the ESCB’) and national legislation. In addition, 

a Member State may not put its NCB in a position where it has limited or no control over its staff, 

or where the government of that Member State can influence its policy on staff matters. Autonomy 

in staff matters extends to issues relating to staff pensions. 

3.2.2  In  order  to  protect  the  BdP’s  autonomy  in  staff  matters,  the  Portuguese  authorities  are  under  an 

obligation to ensure that the specific set of draft provisions on which the ECB was consulted, and 

3  
4  
5  
6  
7  

See Article 48(1)(e) of Law No 3/2004. 
According to Article 48(2) of Law No 3/2004. 
See, for example, the ECB’s Convergence Report 2007, p. 20.  
See, for example, the ECB’s Convergence Report 2010, p. 23. 
See Opinions CON/2008/9, CON/2008/10, CON/2009/15, CON/2009/45, CON/2009/47, CON/2010/42, CON/2010/51, 
CON/2010/56, CON/2010/58, CON/2010/59 and CON/2010/69. All ECB opinions are published on the ECB’s website at 
www.ecb.europa.eu. 

3 

 
                                                 
which are set out in paragraph 1.3, are decided on by the competent Portuguese authorities in close 
cooperation with the BdP8. Such cooperation must ensure the ongoing ability of the BdP to perform 

independently  the  tasks  conferred  on  it  by  the  Treaty,  the  Statute  of  the  ESCB  and  national 

legislation. To this end, the BdP should be involved in drawing up the relevant parts of the draft 

legislative provisions in an effective manner so as to safeguard central bank independence. Taking 

this into account, effective cooperation with the BdP would require:  

(a) 

that the competent Portuguese authorities invite the BdP in a timely and transparent manner 

to  consider  whether  the  overall  objectives  of  the  2011  draft  budget  law  can  be  achieved 

without affecting the BdP’s ability to carry out its tasks and, if so, to present the measures 

the  BdP  intends  to  autonomously  implement  in  the  area  of  staff  matters,  and  in  particular 

staff  remuneration,  for  the  purposes  of  achieving  the  overall  objectives  of  the  2011  draft 

budget law; and 

(b) 

that  the  BdP’s  position  is  properly  considered  and  reflected  in  the  2011  draft  budget  law 

prior to its final adoption with a specific focus on ensuring the BdP’s ongoing ability to carry 

out its tasks.  

Opinion  CON/2010/58  provides  a  good  example  of  effective  cooperation  between  a  government 

and an NCB. The Italian legislative provisions exempted the NCB from its scope, while at the same 

time inviting the NCB to consider, taking into account its own legal order, whether the underlying 

reasons  for  the  legislative  provisions  can  be  achieved  without  prejudicing  the  performance  of  the 

NCB’s  tasks  under  the  Treaty,  the  Statute  of  the  ESCB  and  national  legislation.  The  Portuguese 

authorities  could  follow  the  same  or  a  similar  approach  in  order  to  achieve  effective  cooperation 

and to safeguard central bank independence. 

3.2.3  In  the  light  of  the  BdP’s  expanded  tasks,  including  in  the  fields  of  consumer  protection  and  the 

increased  prudential  supervisory  responsibilities,  notably  in  the  field  of  macroprudential 

supervision, the ECB is particularly concerned that qualified and sufficient human resources will be 

required,  in  addition  to  adequate  financing.  The  ECB  refers  to  Opinion  CON/2007/29  which 

highlighted  the  importance  of  having  appropriate  and  available  resources  to  ensure  BdP’s 
performance of the new tasks9. 

3.2.4  The  combination  of  salary  reductions  with  the  prohibition  on  both:  (a)  hiring  or  recruiting  new 

staff,  unless  exceptionally  justified  by  a  significant  public  interest  accompanied  with  the  duty  to 

provide  information  on  recruitment  on  a  quarterly  basis  to  the  Minister  for  Finance;  and 

(b) undertaking career restructuring, promotions or reclassifications, directly impairs the ability of 

the BdP to employ and even possibly retain qualified staff and may amount de jure to depriving its 

decision-making bodies from their powers of internal organisation and control over staff, or at least 

to significantly limiting them.  

8  

9  

See  Opinions  CON/2008/9,  CON/2008/10,  CON/2009/15,  CON/2009/45,  CON/2009/47,  CON/2010/42,  CON/2010/51, 
CON/2010/56, CON/2010/58, CON/2010/59 and CON/2010/69. 
Opinion CON/2007/29, paragraph 2.5. 

4 

                                                 
3.2.5  The  ECB  is  not  aware  of  any  cooperation  between  the  Portuguese  authorities  and  the  BdP  in 

drawing up the 2011 draft budget law. The ECB understands that Parliament is currently debating 

the 2011 draft budget law, and therefore the BdP could still be given the opportunity to express its 

views  to  accommodate  a  specific  legal  solution  subject  to  the  general  qualifications  made  in 

paragraph 3.2.2. In this regard, the ECB understands that the BdP’s remuneration structure differs 

from that of the rest of the public sector, which is an additional reason that effective cooperation is 

necessary  in  order  to  take  account  of  this  difference,  including  any  possible  distortive  effects. 

Absence  of  effective  cooperation  as  set  out  in  paragraph  3.2.2  would  amount  to  a  serious 

infringement of the principle of central bank independence.  

Institutional independence 

3.2.6   Article  130  of  the  Treaty  prohibits  third  parties  from  giving  instructions  to  NCBs  and  requires 

governments of the Member States to respect this prohibition. Under the current regime, the BdP 
enjoys statutory autonomy in determining its personnel policy10 and the BdP’s staff are subject to 

individual employment law and collective bargaining agreements entered into between the BdP and 
banking sector unions11, which are complemented by internal rules.  

3.2.7  The proposed changes to the 2011 draft budget law represent a departure from this current regime. 

In  particular,  the  2011  draft  budget  law  indirectly  requires  the  BdP  to  take  specific  personnel 

measures, i.e. not to hire or recruit new staff, unless exceptionally justified by a significant public 

interest accompanied with the duty to provide information on staff recruitments on a quarterly basis 

to  the  Ministry  of  Finance,  and  not  to  undertake  career  restructuring,  promotions  or 

reclassifications.  

3.2.8   Taking into account that these measures go beyond what is considered necessary to give full effect 

to  the  objective  of  reducing  public  expenditure,  it  would  be  a  breach  of  the  BdP’s  institutional 

independence  if  such  requirement  would  lead  to  an  authorisation  procedure  whereby  staff 

recruitment by the BdP could be rejected by the Ministry of Finance. The ECB considers that the 

exception from this requirement provided in the 2011 draft budget law based on a significant public 

interest reason does not offers sufficient safeguards for the protection of central bank independence 

and therefore recommends that it be amended. 

Personal independence 

3.2.9  The 2011 draft budget law not only affects the remuneration of the BdP’s staff, but also that of the 

members  of  its  decision-making  bodies.  Article  130  of  the  Treaty  requires  governments  of  the 

Member States to respect the principle of central bank independence and not to seek to influence 

the  members  of  an  NCB’s  decision-making  bodies  in  the  performance  of  their  tasks.  To  comply 

with the Treaty requirements with regard to personal independence of members of decision-making 

bodies, any adjustments to the salaries of the Governor and other members of the BdP’s decision-

10  
Article 57 of the Organic Law of the BdP. 
11    Article 56 of the Organic Law of the BdP. 

5 

                                                 
making  bodies  who  are  involved  in  the  performance  of  ESCB-related  tasks  should  not  affect  the 
terms under which they have been appointed12 and should only apply to future appointments. 

3.2.10 The ECB understands that the proposed legislative changes apply not only to the BdP’s decision-

making bodies, but also more generally to the management of public institutions in Portugal and as 

such  are  not  seeking  directly  or  indirectly  to  influence  the  BdP’s  decision-making  bodies  in  the 

performance of their tasks. However, the ECB considers that the 2011 draft budget law provisions 

may  not  be  considered  compatible  with  the  principle  of  personal  independence  unless  the 

qualifications made in respect of the principle of financial independence are taken into account. 

3.3.  Prohibition of monetary financing - use of the funds resulting from the reduction in salaries 

3.3.1  The  provisions  on  NCB  salary  reductions  must  also  comply  with  the  monetary  financing 

prohibition laid down in Article 123 of the Treaty, as further clarified in Council Regulation (EC) 

No 3603/93 of 13 December 1993 specifying the definitions for the application of the prohibitions 
referred  to  in  Articles  104  [now  123]  and  104b(1)  [now  125(1)]  of  the  Treaty13.  This  provision 

prohibits overdraft facilities or any other type of credit facility with the ECB or NCBs in favour of 

Union institutions, bodies, offices or agencies, central governments, regional, local or other public 

authorities, other bodies governed by public law, or public undertakings of Member States, and the 

purchase directly from these public sector entities by the ECB or NCBs of debt instruments. With a 

view to preserving the integrity of the NCB’s balance sheet, the monetary financing prohibition is 

of key importance in ensuring the primary monetary policy objective of price stability, which must 

not  be  impeded.  Therefore,  the  prohibition  must  be  interpreted  extensively  to  ensure  its  strict 

application.  Even  if  Article  123(1)  of  the  Treaty  refers  literally  to  ‘credit  facilities’,  i.e.  with  an 

obligation to repay such credit, the prohibition also applies a fortiori to other forms of funding, i.e. 

without  an  obligation  to  repay,  since  it  has  the  overall  aim  of  public  finance  discipline  and  of 

prohibiting  NCBs  from  financing  the  public  sector.  This  implies  that  both  the  ultimate  objective 
and the spirit of this provision must be taken into account in its interpretation14.  

3.3.2  From  an  accounting  perspective,  a  reduction  in  staff  salaries  will  reduce  an  NCB’s  operational 

costs,  resulting  in  an  increase  in  its  financial  results  and  leading  to  a  potential  increase  in  its 

financial resources. The principle of central bank financial independence guarantees that the BdP 

can independently use its financial resources as it sees fit to fulfil its mandate. The ECB notes that 

the BdP must be fully independent in deciding how to use the funds resulting from any reduction in 

salaries or pensions that it pays. 

3.3.3  Under  current  Portuguese  law,  part  of  the  NCB’s  profits  for  the  fiscal  year  (80  %)  must  be 

transferred to the State as a dividend, or to other reserves proposed by the Board of Directors and 

approved by the Minister for Finance, as provided for in Article 53(2)(c) of the Organic Law of the 

BdP. In the absence of effective cooperation with the BdP as set out in paragraph 3.2.2, the 2011 

12  
13  
14 

See, for example, Opinion CON/2010/56. 
OJ L 332, 31.12.1993, p. 1. 
See paragraph 9 of Opinion CON/2003/27. 

6 

                                                 
draft budget law could be interpreted as restricting the BdP’s freedom with respect to staff matters, 

for  example,  as  regards  the  hiring  of  new  staff  or  deciding  on  promotions  of  existing  staff. 

Consequently, the BdP would not be seen as having full independence in deciding how to use the 

funds resulting from the reduction in salaries or pensions. If the BdP is not free to use the increased 

funds  in  accordance  with  the  principle  of  financial  independence,  this  could  be  considered  as  an 

increase in the funding of the Portuguese State at the BdP’s expense.  

3.3.4  The draft law does not contain any provisions changing the rules on the BdP’s profit distribution. 

In particular, the BdP does not seem to be required to transfer to the State any net savings from the 

reduction in staff salaries and pensions during the fiscal year. As recently pointed out in Opinion 
CON/2010/6915,  if  the  main  purpose  of  the  salary  reductions  was  to  eventually  increase  the 

financial resources of the State through an interim distribution of increased profits from the NCB to 

the State, this would appear to be a circumvention of the objectives of the prohibition on monetary 

financing. In this respect, the ECB notes that any financial transfer of this nature from the BdP to 

the State budget, without the BdP having the opportunity to use the related resources independently 

for the fulfilment of its tasks, could be assimilated to monetary financing under Article 123 of the 

Treaty. By contrast, a decrease in the  NCB’s operational costs  with a view to increasing  its own 

financial resources to strengthen the performance of its mandate would be acceptable.  

This opinion will be published on the ECB’s website.  

Done at Frankfurt am Main, 12 November 2010 

[signature] 

The President of the ECB 

Jean-Claude TRICHET 

15  

See paragraph 3.5. 

7