Proposal for a COUNCIL IMPLEMENTING DECISION amending Implementing Decision 2011/344/EU on granting Union financial assistance to Portugal
Date: 2012-09-27
Institutions: European Commission
Subjects: Community loan, Portugal, aid evaluation, economic policy, financial planning, gross domestic product, public debt, short-term economic prospects, stability programme

EUROPEAN 
COMMISSION 

Brussels, 27.9.2012  
COM(2012) 574 final 

2012/0276 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

amending Implementing Decision 2011/344/EU on granting Union financial assistance to 
Portugal 

EN 

   EN 

 
 
 
 
  
 
EXPLANATORY MEMORANDUM 

Upon a request by Portugal, the Council granted financial assistance to Portugal on 17 May 
2011  (Council  Implementing  Decision  2011/344/EU)  in  support  of  a  strong  economic  and 
reform  programme  aiming  at  restoring  confidence,  enabling  the  return  of  the  economy  to 
sustainable growth, and safeguarding financial stability in Portugal, the euro area and the EU.  

In  line  with  Article  3(9)  of  Decision  2011/344/EU,  the  Commission,  together  with  the  IMF 
and  in  liaison  with  the  ECB,  has  conducted  the  fifth  review  to  assess  the  progress  on  the 
implementation of the agreed measures as well as their effectiveness and economic and social 
impact.  

Taking  into  account  the  recent  economic,  fiscal  and  financial  developments  and  policy 
actions,  the  Commission  considers  that  some  changes  to  the  economic  policy  conditions 
underpinning the assistance are necessary to secure the programme's objectives, as explained 
in the recitals of the proposed amendments to the Council implementing Decision.  

EN 

2 

   EN 

 
2012/0276 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

amending Implementing Decision 2011/344/EU on granting Union financial assistance to 
Portugal 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union,  

Having regard to Council Regulation (EU) No 407/2010 of 11 May 2010 establishing a European 
financial stabilisation mechanism1, and in particular Article 3(2) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

In line with Article 3(9) of Council Implementing Decision 2011/344/EU, the Commission, 
together  with  the  International  Monetary  Fund  (IMF)  and  in  liaison  with  the  European 
Central  Bank  (ECB),  has  conducted  the  fifth  review  of  the  authorities'  progress  on  the 
implementation  of  the  agreed  measures  as  well  as  of  the  effectiveness  and  economic  and 
social impact of the agreed measures. 

The rebalancing of the Portuguese economy is taking place at a faster-than-expected pace. 
The second quarter of 2012 brought a substantial quarter-on-quarter real GDP contraction of 
1.2 percent following a flat first quarter. For the year as a whole, the projected pace of the 
economic  recession  remains  unchanged  at  -3  percent.  The  current  account  deficit  is 
declining more rapidly than anticipated, falling to 3 percent of GDP in 2012 from nearly 10 
percent just two years ago. This adjustment is taking place on the back of well-performing 
exports and a rapid fall in imports. Looking forward, economic activity will be affected by a 
diminishing  stimulus  from  external  demand  and  the  impact  of  further  budgetary 
consolidation.  As  a  consequence,  GDP  growth  has  been  revised  downward  by  about  1 
percentage point in both 2013 and 2014 to around -1 and +1 percent. 

In spite of a rigorous budget implementation on the expenditure side, data until July point to 
a budgetary gap of 2¼ percent of GDP in 2012 compared with the budget plans. While the 
faster-than-projected adjustment from domestic demand to exports is welcome, it impacts on 
budgetary  execution  in  two  ways.  First,  employment-intensive  domestic  sectors,  such  as 
construction, are affected most negatively and the resulting higher unemployment weighs on 
social security budgets. Second, the tax-intensity of production and consumption is falling, 
leading  to  noticeable  revenue  shortfalls.  The  growth  composition  effect  on  revenues  is 
amplified by intra-category shifts away from higher-taxed items such as consumer durables 
towards  lower-taxed  items  of  daily  consumption.  Also,  the  weakness  in  direct  taxation  is 
amplified  by  negative  bracket  creep  as  falling  incomes  are  taxed  at  lower  rates  and  tax 

1 

OJ L 118, 12.5.2010, p. 1. 

EN 

3 

   EN 

 
                                                 
(4) 

(5) 

(6) 

(7) 

(8) 

revenues  on  profits  shrink.  By  contrast,  expenditure  has  overall  developed  according  to 
plans,  with  higher-than-budgeted  savings  on  compensations  for  employees.  Although  a 
number of one-off factors could reduce the gap to about ¾ percent of GDP in 2012, a large 
carry-over into 2013 and 2014 of about 1½ percent of GDP would remain, making the fiscal 
programme targets over 2012-2014 unattainable.  

In  view  of  the  large  revenue  shortfalls  and  the  more  subdued  growth  outlook,  the  deficit 
targets  haven  been  adjusted  to  5.0  percent  of  GDP  in  2012,  4.5  percent  in  2013  and  2.5 
percent of GDP in 2014. As the fiscal gap is assessed to be essentially outside the control of 
the  government  a  revision  of  the  targets  to  accommodate  part  of  the  shortfall  seems 
appropriate. Even under the revised targets significant consolidation efforts of 3 percent and 
1¾ percent of GDP will be necessary in 2013 and 2014. In order to maintain the credibility 
of the Programme some degree of front-loading of the adjustment is warranted. 

A  range  of  structural  spending  and  revenue  measures  underpin  the  revised  fiscal  targets. 
Measures worth ¼ percent of GDP will be taken still in 2012 to reach the target of 5 percent 
of  GDP.  This  includes,  inter  alia,  spending  freezes  and  a  frontloading  of  some  of  the 
measures planned for next year. For 2013, consolidation measures amounting to 3 percent of 
GDP will be incorporated in the budget to achieve the target of 4.5 percent of GDP. These 
include a further decrease in the wage bill, a reduction in intermediate consumption, a cut in 
social  transfers,  a  further  rationalisation  in  the  health  sector,  reduced  spending  on  capital 
formation,  as  well  as  revenue  increases  achieved  via  a  reform  of  the  personal  income  tax 
simplifying  the  tax  structure,  broadening  the  base  by  eliminating  some  tax  expenditures, 
increasing  the  average  tax  rate  while  improving  progressivity,  broadening  the  corporate 
income  tax  base  by  eliminating  interest  deductibility,  rising  excises  taxes  and  changing 
property taxation. For 2014, a comprehensive expenditure review has been initiated with a 
view  to  identifying  spending  cuts  (of  EUR  4  billion  over  2014-2015)  to  reach  a  budget 
deficit of 2.5 percent of GDP. 

Instruments to control government expenses are put in place. The new commitment control 
system is being implemented but full compliance needs to be ensured so as to avoid a further 
build-up of new arrears. Budgetary fragmentation will be reduced and costly inefficiencies 
are  being  tackled  across  a  broad  range.  This  includes  containing  losses  of  public  sector 
enterprises, renegotiating public-private partnerships and pushing for further savings in the 
health care sector. 

Under  the  Commission's  current  projections  for  nominal  GDP  growth  (-1.0 %  in  2011, 
-2.7 % in 2012, 0.3 % in 2013 and 2.2 % in 2014) and the revised fiscal targets, the path for 
the debt-to-GDP ratio is expected as follows: 107.8 % in 2011, 119.1 % in 2012, 123.7 % in 
2013  and  123.6 %  in  2014.  The  debt-to-GDP  ratio  would  therefore  be  stabilised  at  below 
124 % and be placed on a declining path in 2014, assuming further progress in the reduction 
of  the  deficit.  Debt  dynamics  are  affected  by  several  below-the-line  operations,  including 
sizeable  acquisitions  of  financial  assets,  notably  for  possible  bank  recapitalisation  and 
financing  to  state-owned  enterprises  and  differences  between  accrued  and  cash  interest 
payments.  

The  liquidity  and  the  solvency  conditions  of  the  banking  system  have  improved  since  the 
fourth  review,  reflecting  the  ongoing  deleveraging,  the  exceptional  liquidity  support 
provided by the Eurosystem, and a capital augmentation worth over EUR 7 billion. Banks 
presented their updated funding and capital plans (4th edition). Albeit slightly less optimistic 
on deposits growth, all banks foresee to meet the indicative loan to deposit target of 120% 
by 2014. Overall, the implementation of the Memorandum of Understanding on the financial 
sector part is proceeding in accordance with the envisaged objectives to preserve financial 

EN 

4 

   EN 

 
(9) 

stability. Some efforts are still needed in some banks to meet the end of the year 10% core 
tier 1 target of the Banco de Portugal. 

Progress  in  the  implementation  of  reforms  to  raise  competitiveness,  employment  and  the 
growth  potential  is  broadly  satisfactory.  The  revised  Labour  Code  entered  into  force  in 
August  2012.  Further  important  reforms  in  the  area  of  severance  payment  and  collective 
bargaining  are  planned  by  the  end  of  September.  The  Government  has  recently  adopted  a 
number  of  Active  Labour  Market  Policies  aimed  at  improving  the  functioning  of  Public 
Employment  Services,  supporting  employment  creation,  strengthening  activation  and 
offering  more  effective  training  opportunities.  The  judiciary  reforms  in  the  areas  of  civil 
procedure  and  court  organisation,  which  will  speed  up  civil  and  commercial  litigation  and 
unclog  the  court  system,  are  progressing  well.  Steps  have  been  taken  to  improve  the 
framework  for  the  recognition  of  professional  qualifications  with  the  adoption  of 
amendments  to  the  law  transposing  Directive  2005/36/EC  of  the  European  Parliament  and 
the Council on the mutual recognition of Professional Qualifications and with the adoption 
by the government of a law proposal aimed at improving the functioning of highly regulated 
professions. Work on the implementation of the Services Directive has advanced at a steady 
pace  as  regards  sector-specific  legislation,  with  the  adoption  of  the  remaining  necessary 
sector-specific legislative amendments expected by the end of the year. Further efforts in the 
implementation  of  the  zero  authorisation  initiative  and  the  set-up  of  the  point  of  single 
contact  foreseen  by  the  Directive  2006/123/EC  of  12  December  2006  on  services  in  the 
internal  market2  are  essential  to  reduce  the  administrative  burden.  In  view  of  facilitating 
access to finance to Small and Medium Enterprises (SMEs), the Government is committed 
to adopt, if necessary, a number of additional initiatives, including mechanisms to strengthen 
the export orientation of SMEs.  

(10)  Building  on  the  independent  report  on  the  main  National  Regulator  Authorities  (NRA), 
Portugal will prepare a framework law that protects the public interest and promotes market 
independence  and  financial, 
efficiency.  The 
administrative  and  management  autonomy  to  exercise  their  responsibilities,  in  full 
compliance  with  EU  law.  The  law  shall  also  contribute  towards  the  effectiveness  of  the 
therefore  supporting  and 
competition  authority 
complementing the effect of the recently adopted competition law.  

in  enforcing  competition 

law  shall  guarantee 

the  Regulator's 

rules 

(11)  The fifth update of the Memorandum of Understanding includes a full section on promoting 
a  business-friendly  licensing  environment  which  provides  a  more  detailed  calendar  and 
specific milestones in the revision of some important legal regimes such as environment and 
territorial planning, industrial, commercial and tourism licensing, 

HAS ADOPTED THIS DECISION:  

Article 1 

Article 3 of Implementing Decision 2011/344/EU is amended as follows: 

(1) paragraphs 3 and 4 are replaced by the following: 

'3. The general government deficit shall not exceed 5.9 % of GDP in 2011, 5.0 % in 2012, 4.5% of 
GDP  in  2013  and  2.5%  of  GDP  in  2014  in  line  with  the  revised  excessive  deficit  procedure 
requirements.  For  the  calculation  of  this  deficit,  the  possible  budgetary  costs  of  bank  support 

2 

OJ L 376, 27.12.2006, p. 36. 

EN 

5 

   EN 

 
                                                 
measures in the context of the Portuguese Government’s financial sector strategy shall not be taken 
into  account.  Consolidation  shall  be  achieved  by  means  of  high-quality  permanent  measures  and 
minimising the impact of consolidation on vulnerable groups.' 

'4. Portugal shall adopt the measures specified in paragraphs 5 to 8 before the end of the indicated 
year,  with  exact  deadlines  for  the  years  2011-2014  being  specified  in  the  Memorandum  of 
Understanding. Portugal shall stand ready to take  additional consolidation  measures to  reduce the 
deficit to below 3 % of GDP by 2014 in case of deviations from targets.' 

(2) paragraphs 6 to 9 are replaced by the following: 

'6.  Portugal  shall  adopt  the  following  measures  during  2012,  in  line  with  specifications  in  the 
Memorandum of Understanding: 

(a) The general government deficit shall not exceed 5.0% of GDP in 2012. Portugal shall 
continue to closely monitor fiscal developments and implement further policy adjustments 
to  achieve  the  2012  target.  To  this  effect,  Portugal  shall  freeze  some  of  the  2012  budget 
appropriations for investment projects not yet initiated; increase stamp duties on high value 
properties;  rise  tax  rates  on  investment  income;  frontload  some  of  the  2013  budget 
measures  affecting  social  benefits;  implement  additional  measures  generating  savings  in 
intermediate  consumption  and  raising  revenues  from  sales  in  order  to  secure  the  deficit 
target for 2012.  

(b)  Portugal  shall  aim  at  a  reduction  of  expenditure  in  2012  of  at  least  EUR  6.8  billion 
including  a  reduction  in  public  sector  wages  and  employment;  cuts  in  pensions;  a 
comprehensive reorganisation of the central administration, eliminating redundancies and 
other  inefficiencies;  reducing  transfers  to  state-owned  enterprises;  reorganising  and 
reducing  the  number  of  municipalities  and  parishes;  cuts  in  education  and  health;  lower 
transfers  to  regional  and  local  authorities;  and  reductions  in  capital  expenditure  and  in 
other expenditure as set out in the Programme.  

(c)  On  the  revenue  side,  Portugal  shall  implement  revenue  measures  of  at  least  EUR  3 
billion, including broadening VAT bases through reducing exemptions and rearranging the 
lists of goods and services subject to reduced, intermediate and higher rates; an increase in 
excise  taxes;  broadening  the  corporate  and  personal  income  tax  bases  by  reducing  tax 
deductions  and  special  regimes;  ensuring  the  convergence  of  personal  income  tax 
deductions  applied  to  pensions  and  labour  income;  and  changes  in  property  taxation  by 
substantially  reducing  exemptions.  These  measures  shall  be  complemented  by  action  to 
fight tax evasion, fraud and informality. 

(d)  Portugal  shall  continue  adopting  measures  to  reinforce  public  finance  management. 
Portugal  shall  implement  the  measures  provided  for  in  the  new  Budgetary  Framework 
Law,  including  setting  up  a  medium-term  budgetary  framework.  The  local  and  regional 
budgetary  frameworks  shall  be  considerably  strengthened,  in  particular  by  aligning  the 
respective  financing  laws  with  the  requirements  of  the  Budgetary  Framework  Law. 
Portugal  shall  step  up  the  reporting  and  monitoring  of  public  finances  and  reinforce 
budgetary  execution  rules  and  procedures.  The  Portuguese  Government  shall  apply  the 
strategy for the validation and settlement of arrears and step up the implementation of the 
commitment control law to prevent the creation of new arrears. Portugal shall implement 
the new legal and institutional PPPs framework. No PPP shall be launched until the new 
framework is fully effective. Based on a study prepared by an international auditing firm, 
Portugal shall develop a detailed strategic plan, in full compliance with applicable EU law 
including  Public  Procurement  law,  in  view  of  obtaining  substantial  fiscal  gains,  while 

EN 

6 

   EN 

 
minimising  the  debt  burden  and  ensure  sustainable  reduction  of  government  liabilities. 
Portugal  shall  adopt  a  law  to  regulate  the  creation  and  the  functioning  of  state-owned 
enterprises (SOEs) at the central, regional and local levels. 

(e)  Portugal  shall  apply  the  new  legislation  to  reorganise  and  significantly  reduce  the 
number of local government entities. These changes will come into effect by the beginning 
of the next local election cycle. In addition, Portugal shall deepen efforts to streamline the 
public sector by reducing entities and improving task sharing at all levels of government. 

(f) Portugal shall deepen the reform of the revenue administration by reinforcing the links 
between  the  Autoridade  Tributária  e  Aduaneira  and  the  revenue  collection  units  of  the 
Social  Security,  reducing  the  number  of  municipal  offices  and  addressing  remaining 
bottlenecks in the tax appeal system. 

(g)  Portugal  shall  implement  the  financial  arrangement  with  the  Autonomous  Region  of 
Madeira. 

(h) Portugal shall adopt measures to improve the efficiency and sustainability of SOEs at 
central,  regional  and  local  level.  Portugal  shall  explore  options  for  managing  the  heavy 
debt  load  of  SOEs,  including  Parpública,  and  to  ensure  improved  conditions  for  market 
financing. Portugal shall aim at reaching operational balance at sector level by the end of 
2012.  

(i)  Portugal  shall  continue  implementing  the  privatisation  programme.  The  direct  sale  of 
Caixa Geral de Depositos (CGD) insurance arm Caixa Seguros is ongoing.  

(j) The Portuguese Government shall submit draft legislation to the Portuguese Parliament 
to  align  severance  payments  with  the  Union  average  of  8-12  days  per  year  of  work  and 
create a compensation fund for severance payments. 

improving  firms’  competitiveness  with  a  view 

(k) Portugal shall promote wage developments consistent with the objectives of fostering 
job  creation  and 
to  correcting 
macroeconomic imbalances. Over the Programme period, any increase in minimum wages 
shall take place only if justified by economic and labour market developments. Measures 
shall  be  taken  to  address  weaknesses  in  the  current  wage  bargaining  schemes,  including 
legislation to redefine the criteria and modalities of the extension of collective agreements 
and  to  facilitate  firm-level  agreements.  Until  then,  the  collective  agreements  shall  not  be 
extended.  

(l) Portugal shall continue to improve the effectiveness of its active labour market policies 
in  line  with  the  results  of  the  assessment  report  and  the  action  plan  to  improve  the 
functioning of the Public Employment Services. 

(m) Portugal shall implement the measures set out in its action plans to improve the quality 
of secondary and vocational education and training. 

(n) The functioning of the judicial system shall be improved by implementing the measures 
proposed  under  the  Judicial  Reform  Map  and  by  applying  targeted  measures  to 
progressively eliminate the court backlog and to foster alternative dispute resolution. 

(o)  Portugal  shall  continue  opening  up  the  economy  to  competition.  The  Portuguese 
Government shall take the necessary measures to ensure that obstacles to free movement of 
capital will not be created by their action and in particular, that the Portuguese State or any 
public  body  does  not  conclude,  in  a  shareholder  capacity,  agreements  which  may  hinder 

EN 

7 

   EN 

 
the  free  movement  of  capital  or  influence  the  management  control  of  companies. 
Functioning  of  Professional  services  shall  be  fostered  by  improving  the  recognition  of 
framework  on  professional  qualification  and  by  eliminating  unnecessary  restrictions  on 
regulated  professions.  In  construction  and  real  estate  activities,  Portugal  shall  make  the 
requirements  for  cross  border  providers  less  burdensome  and  review  obstacles  to  the 
establishment of services providers.  

(p) The competition and regulatory framework shall be improved. Portugal shall reinforce 
the  independence,  autonomy  and  governance  of  the  main  national  regulatory  authorities; 
implement the Competition Law with a view to improving the speed and effectiveness of 
the enforcement of competition rules; and monitor the inflow of new cases and report on 
the functioning of the specialised court for competition, regulation and supervision.  

(q)  In  the  energy  sector,  Portugal  shall  take  measures  to  facilitate  entry,  promote  the 
establishment  of  the  Iberian  gas  market  and  shall  take  further  steps  towards  the  full 
transposition  of  the  Third  EU  Energy  Package.  To  ensure  the  National  Regulatory 
Authority’s  independence,  autonomy  and  all  powers  foreseen  in  the  Package,  Portugal 
shall  adopt  the  new  regulators'  bylaws  as  agreed  in  July  2012  with  EC/ECB/IMF  by  the 
third  quarter  2012,  and  ensure  that  they  are  effective  before  end  of  year  in  time  for  the 
liberalisation of the electricity and gas market. Portugal shall take measures to review the 
support  and  compensation  schemes  for  the  production  of  electricity.  Portugal  shall  take 
measures to reduce excessive rents and eliminate the tariff debt ('défice tarifário') by 2020, 
focusing  on  compensation  schemes  for  power  guarantee,  special  regime  (renewables  - 
excluding  those  granted  under  tender  mechanisms  -  and  cogeneration),  and  the  ordinary 
regime ('CMECs' and 'CAEs').  

(r)  In  other  network  industries,  in  particular  transport,  telecommunications  and  postal 
services, Portugal shall adopt additional measures to promote competition and flexibility. 

(s) Portugal shall adopt a number of measures in view of increasing the efficiency of the 
licensing schemes for territorial planning, industrial and commercial licensing and tourism. 
In  addition  the  Portuguese  government  shall  analyse  and  fast-track  applications  for  the 
licensing of planned investment projects which are left unresolved or undecided for more 
than 12 months.  

(t) Portugal shall prepare an action plan with measures to facilitate access to finance and to 
export markets for companies, in particular for SMEs.' 

'7.  Portugal  shall  adopt  the  following  measures  during  2013,  in  line  with  specifications  in  the 
Memorandum of Understanding: 

(a)  The  general  government  deficit  shall  not  exceed  4.5%  of  GDP  in  2013.  The  2013 
budget shall include permanent consolidation measures of at least 3% of GDP aiming at a 
reduction  of  the  general  government  deficit  within  the  timeframe  referred  to  in  Article 
3(3). The government shall explore ways to increase the weight of expediture reduction in 
the  overall  consolidation  package  for  2013  in  order  to  ensure  a  medium-term  growth 
friendly  fiscal  adjustment  tilted  towards  the  expenditure  side.  The  government  shall  use 
contingency  measures  in  the  course  of  2013  in  case  of  slippages  given  possible 
implementation risks. 

(b) The budget shall include revenue measures such as a reform of the personal income tax 
simplifying  the  tax  structure,  broadening  the  base  by  eliminating  some  tax  expenditures, 
increasing  the  average  tax  rate  while  improving  progressivity;  broadening  the  corporate 

EN 

8 

   EN 

 
income tax base, increasing investment income tax rate; higher excises taxes and changes 
in property taxation. 

(c)  On  the  expenditure  side,  the  2013  budget  shall  identify  measures  such  as  lowering 
expenditures  in  the  central  administration,  education  and  health;  streamlining  public  and 
private social transfers and subsidies; reducing transfers to local and regional authorities; 
reduction  of  the  wage  bill  by  decreasing  permanent  and  temporary  staff  and  reducing 
overtime pay; and lower operational and capital expenditures by SOEs. 

(d) Portugal shall complete the elimination of the court backlog. 

(e)  Portugal  shall  improve  the  business  environment  by  reducing  administrative  burden 
through  the  extension  of  simplification  reforms  (Points  of  Single  Contact  –  PSC  -  and 
‘Zero  Authorisation’  projects)  to  all  sectors  of  the  economy.  In  particular,  Portugal  shall 
adapt  the  content  and  the  information  available  at  the  PSC  to  ensure  conformity  with 
Directive  2006/123/EC  of  the  European  Parliament  and  the  Council*  and  with  Directive 
2005/36/EC  of  the  European  Parliament  and  of  the  Council**.  Portugal  shall  alleviate 
credit  constraints  of  small  and  medium-sized  enterprises,  including  through  the 
implementation of Directive 2011/7/EU of the European Parliament and of the Council***. 

(f)  Portugal  shall  adapt  the  content  and  the  information  available  at  the  Point  of  Single 
Contact  (PSC)  for  the  44  amended  regimes  to  ensure  conformity  with  the  Services 
Directive, shall adapt the content and information available at the PSC for the 13 regimes 
to ensure conformity with the Professional Qualifications Directive  

(g)  Portugal  shall  continue  implementing  its  privatisation  programme,  which  shall  be 
expanded  to  include  additional  companies  and  assets  to  the  ones  identified  in  the 
Memorandum of Understanding for sale or concession in 2013.' 

__________________________ 

* OJ L 376, 27.12.2006, p. 36. 

** OJ L 255, 30.9.2005, p. 1 ' 

*** OJ L 48, 23.2.2011, p. 1. 

'8. The general government deficit shall not exceed 2.5% of GDP in 2014. To achieve this objective 
Portugal shall apply a thorough expenditure reducing plan worth about EUR 4 billion over 2014-
2015. A comprehensive expenditure review to fully specify the additional sources of savings shall 
be  carried  out  for  the  sixth  review  and  measures  shall  be  fully  specified  by  February  2013.  The 
fiscal consolidation plans for 2014-2015 shall be fully defined in the 2013 Stability Programme.' 

'9. With a view to restoring confidence in the financial sector, Portugal shall adequately recapitalise 
its  banking  sector  and  ensure  an  orderly  deleveraging  process.  In  that  regard,  Portugal  shall 
implement  the  strategy  for  the  Portuguese  banking  sector  agreed  with  the  Commission,  the  ECB 
and the IMF so that financial stability is preserved. In particular, Portugal shall: 

(a) advise banks to strengthen their collateral buffers on a sustainable basis and monitor the 
outstanding government guaranteed bank bonds; 

(b) ensure that banks reach the Programme target of the Core Tier 1 ratio of 10 % at the 
latest by the end of 2012; 

EN 

9 

   EN 

 
(c)  ensure  a  balanced  and  orderly  deleveraging  of  the  banking  sector,  which  remains 
critical to eliminating funding imbalances on a permanent basis. Banks’ funding plans aim 
at  reducing  the  loan-to-deposit  ratio  to  an  indicative  value  of  around  120%  in  2014  and 
reducing  the  reliance  on  Eurosystem  funding  in  the  medium  term.  Those  funding  plans 
shall be reviewed quarterly; 

(d) continue to streamline the state-owned CGD; 

(e) optimise the process for recovering the assets transferred from BPN to the three state-
owned  SPVs  through  the  outsourcing  to  a  professional  third  party  of  the  management  of 
the  assets,  with  a  mandate  to  gradually  recover  the  assets  over  time.  The  Portuguese 
government  shall  select  the  party  managing  the  credits  through  a  competitive  bidding 
process  and  include  adequate  incentives  to  maximise  the  recoveries  and  minimise 
operational  costs  into  the  mandate.  Ensure  timely  disposition  of  the  subsidiaries  and  the 
assets in the other two state-owned SPVs. 

(f) based on the set of preliminary proposals to encourage the diversification of financing 
alternatives  to  the  corporate  sector  presented,  develop  and  evaluate  the  different  options 
put  forward  with  a  view  to  set  priorities.  Assess  the  effectiveness  of  EU-compatible 
government-sponsored  export  credit  insurance  schemes  with  a  view  to  take  appropriate 
measures to promote exports; 

(g) ensure the initial and periodical funding arrangements for the Resolution Fund in two 
steps – first by the approval of a decree-law on the banks' contributions to the resolution 
fund  by  November  2012  and  secondly  by  the  approval  of  a  supervisory  notice  on  the 
specific periodic contributions by banks one month later; adopt the supervisory notices on 
recovery plans by the end of October 2012; adopt the regulation on resolution plans by the 
end of November 2012; and adopt the rules applicable to setting-up and operation of bridge 
banks in line with Union competition rules by the end of October 2012. Priority shall be 
given to the review of the recovery and subsequent resolution plans of the banks that are of 
systemic importance; 

(h)  establish  a  framework  for  financial  institutions  to  engage  in  out-of-court  debt 
restructuring  for  households  and  SMEs  and  implement  an  action  plan  to  raise  public 
awareness of the restructuring tools.' 

(3) The following paragraph 10 is added: 

'10. In order to ensure the smooth implementation of the Programme’s conditionality, and to help to 
correct  imbalances  in  a  sustainable  way,  the  Commission  shall  provide  continued  advice  and 
guidance on fiscal, financial market and structural reforms. Within the framework of the assistance 
to be provided to Portugal, together with the IMF and in liaison with the ECB, it shall periodically 
review  the  effectiveness  and  economic  and  social  impact  of  the  agreed  measures,  and  shall 
recommend necessary corrections with a view to enhancing growth and job creation, securing the 
necessary  fiscal  consolidation  and  minimising  harmful  social  impacts,  particularly  on  the  most 
vulnerable parts of Portuguese society.' 

This Decision is addressed to Portugal.  

EN 

Article 2 

10 

   EN 

 
Article 3 

This Decision shall be published in the Official Journal of the European Union. 

Done at Brussels,  

For the Council 
The President 

EN 

11 

   EN