Proposal for a COUNCIL IMPLEMENTING DECISION amending Implementing Decision 2011/344/EU on granting Union financial assistance to Portugal
Date: 2013-05-24
Institutions: European Commission
Subjects: Community loan, Portugal, banking system, budget deficit, financial intervention, financial planning, financing plan, public debt, stability programme

EUROPEAN 
COMMISSION 

Brussels, 24.5.2013  
COM(2013) 330 final 

2013/0171 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

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

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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 seventh 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.  

Moreover, in line with the statement by the Eurogroup and Ecofin Ministers of 12 April 2013, 
with a view to smoothing the debt redemption profile and lowering the refinancing needs in 
the  post-programme  years  the  Council  Implementing  Decision  should  be  amended  with  a 
view to extending the average maturity of the overall facility from “up to 12.5 years” to “up to 
19.5 years” through the maturity extension of the individual disbursements. 

At the request of Portugal and market conditions permitting, the Commission may refinance 
all or part of its initial borrowing in order to extend the maturity of an instalment or a tranche, 
provided  that  the  maximum  average  maturity  of  19.5  years  is  respected.  Any  amounts 
borrowed by the Commission in advance shall be kept on an account with the ECB that the 
Commission  has  opened  for  the  administration  of  the  financial  assistance.  The  Commission 
will also make sure that the maturity at which the refinancing operations are made caters for 
the  proper  management  of  the  margin  under  the  EU  Own  Resources  ceiling,  including  the 
redemption  profile  of  the  EU  bonds.  The  refinancing  operations  are  expected  to  take  place 
from 2016 and all costs incurred by the EU in concluding and carrying out each operation will 
be borne by Portugal. 

It  should  be  noted  that  this  decision  also  aims  at  improving  borrowing  conditions  for  the 
sovereign as well as generating positive spill-over effects for the private sector. These effects 
are beneficial for both creditor and debtor countries and therefore contribute to the stability of 
the euro area. 

Taking into account the above factors, the Commission considers that the changes consisting 
in  the  extension  of  the  average  maturity  of  the  EFSM  loan  to  Portugal  are  conducive  to 
securing the programme's objectives. 

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2013/0171 (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) 

(4) 

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  seventh  review  of  the 
authorities'  progress  on  the  implementation  of  the  agreed  measures  between  25 
February and 14 March. Subsequently between 14 and 17 April 2013 and between 8 
and 11 May 2013 additional assessment of some fiscal measures was carried out. 

An extension of the maximum average maturity of the EU loans would be beneficial 
as it would support Portugal's efforts to regain full market access and successfully exit 
the  programme.  In  order  to  take  full  benefit  from  the  extension  of  the  maximum 
average maturity of the EU loan, the Commission should be authorised to extend the 
maturity of instalments and tranches. 

Real  GDP  fell  by  3.2  percent  in  2012  after  an  unexpectedly  large  contraction  of 
economic  activity  and  employment  in  the  final  quarter  of  the  year.  These 
developments  required  a  downward  revision  of  the  economic  outlook:  real  GDP  is 
now  forecast  to  contract  by 2.3  percent  in  2013  due  to  the  more  negative  carry-over 
from 2012, stronger contraction in domestic consumption on the back of higher than 
previously anticipated unemployment and a weaker outlook for external demand. The 
economic  recovery  is  also  forecast  to  be  more  muted  than  previously  expected  with 
real GDP forecast to bottom out in the second half of the year and to grow in 2014 at 
an annual average rate of 0.6 percent; real GDP growth in 2015 is expected to reach 
1.5 percent. The unemployment rate is expected to peak at 18½ percent of the labour 
force in 2014.  

The general government deficit reached 6.4 percent of GDP in 2012, which is above 
the  programme  target  of  5  percent  of  GDP.  The  headline  deficit  was  affected  by  a 
number of large one-off operations, the budgetary impact of which was not known at 
the previous review. The operations include the capital injection into the state-owned 
bank  CGD  (0.5  percent  of  GDP),  the  re-routing  through  the  government  of  the 
conversion  into  equity  of  shareholder  loans  of  Parpública  to  SAGESTAMO,  two 

1 

OJ L 118, 12.5.2010, p. 1. 

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(5) 

(6) 

(7) 

(8) 

companies  outside  the  general  government  perimeter  (0.5  percent  of  GDP)  and  the 
impairments associated with the transfer of assets from BPN (0.1 percent of GDP). In 
addition, following an advice by Eurostat the revenues from the sale of the operating 
concession  for  the  major  airports  in  Portugal  was  treated  as  equity  withdrawal  and 
hence not impacting the general government balance, contrary to what the government 
had foreseen in the budget (0.7 percent of GDP). Excluding the impact of these one-
off  factors  from  the  headline  balance,  the  general  government  deficit  would  have 
amounted to 4.7 percent of GDP, below the target. Confining the deficit to this level 
was challenging as the macro-economically driven underperformance of revenues had 
to be compensated by higher-than-budgeted savings, in particular in the public wage 
bill, intermediate consumption and appropriations for new investment projects 

Overall,  the  fiscal  effort  in  2012,  measured  by  the  improvement  in  the  structural 
balance, reached 2.4 percent of GDP and is in line with the Council Recommendation 
of 9 October 2012 to bring an end to the situation of an excessive government deficit 
in Portugal. The improvement in the structural primary balance was even higher at 2.7 
percent of GDP. 

Following  the  developments  in  2012,  the  new  2013  budgetary  baseline  assumes  that 
revenue  shortfalls  and  increased  social  transfers  in  kind  are  carried  over  whereas  a 
large  part  of  the  expenditure  savings  in  the  last  quarter  of  2012  are  considered  non-
permanent,  leading  to  a  negative  carry-over  of  about  0.4  percent  of  GDP  in  2013. 
Furthermore,  the  significant  deterioration  in  the  macro-economic  outlook  in  2013 
lowered  the  budgetary  baseline  by  another  0.5  percent  of  GDP.  In  view  of  these 
developments, the budgetary targets for the period 2013-2015 as specified at the fifth 
review  of  the  programme  (4.5  percent  of  GDP  in  2013  and  2.5  percent  of  GDP  in 
2014) are no longer feasible. As the deviation is assessed to be essentially outside the 
control of the government, a revision of the budgetary adjustment seems appropriate.  

The  deficit  targets  have  therefore  been  adjusted  to  5.5  percent  of  GDP  in  2013,  4.0 
percent  of  GDP  in  2014  and  2.5  percent  of  GDP  in  2015.  This  fiscal  path  has  been 
recalibrated  so  as  to  maintain  a  structural  primary  adjustment  of  close  to  9  percent 
over the period 2011-2015, while allowing the operation of automatic stabilizers and 
taking into consideration financing and debt constraints as well as the social costs of 
the  adjustment.  Even  under  the  revised  targets  a  sizable  amount  of  consolidation 
measures  of  3.5  percent  of  GDP  in  2013  and  2  percent  of  GDP  in  2014  will  be 
necessary.  A  range  of  structural  spending  and  revenue  measures  underpin  the 
envisaged adjustment over the programme period. The consolidation path is expected 
to continue beyond the programme period so as to bring the deficit clearly below the 3 
percent threshold by 2015. 

The  2013  Budget  Law  included  discretionary  measures  of  a  structural  nature  worth 
slightly more than 3 percent of GDP, after accounting for the reinstatement of one of 
the two bonus payments for public workers and 1.1 times of the two bonus payments 
for  pensioners  that  had  been  cut  in  2012.  On  April  5,  however,  the  Constitutional 
Court ruled against some of the 2013 budget provisions, including the remaining cut of 
one bonus payment for public workers, 0.9 times of the bonus payment for pensioners 
and  a  new  surcharge  on  unemployment  and  sick  leave  benefits,  thereby  creating  a 
budgetary gap of 0.8 percent of GDP. To close this gap and to underpin the required 
fiscal adjustment in 2014 and 2015, the government adopted in the course of April and 
May a package of permanent expenditure-reducing measures with a cumulative yield 
of EUR 4.7 billion or 2.8 percent of GDP over 2013-2014, of which measures worth 
0.8 percent of GDP are frontloaded into 2013.  

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(9) 

(10) 

Also as a consequence of the full reinstatement of the two bonus payments for public 
workers  and  pensioners,  revenue  increases  account  for  more  than  two  thirds  of  the 
overall fiscal consolidation effort in 2013 while expenditure cuts account for less than 
one third, contrary to original intentions to focus the consolidation on expenditure. 

In  2013,  revenue  measures  include  a  restructuring  of  the  personal  income  tax;  a 
surcharge of 3.5 percent on the part of taxable income exceeding the minimum wage; a 
solidarity  surcharge  on  the  highest  levels  of  income;  the  broadening  of  the  tax  base 
and  other  revenue-raising  changes  in  corporate  taxation;  higher  excises  on  tobacco, 
alcohol and natural gas; a broadening of the property tax base after the revaluation of 
properties  and  an  extraordinary  solidarity  contribution  on  pensions  to  cope  with 
ageing-related  sustainability  challenges.  On  the  expenditure  side,  the  measures 
envisage  a  sizeable  reduction  in  the  public  sector  wage  bill  by  optimising  the 
allocation of resources and resizing the public sector work force and by reducing over-
time  payments,  fringe  benefits  and  compensations  during  extraordinary  leave.  Other 
expenditure-saving measures include the continuation of rationalisation efforts in the 
health sector; the streamlining of social benefits and better targeting of social support; 
the  reduction  of  intermediate  consumption  across  line  ministries;  savings  from  the 
renegotiation  of  Public-Private-Partnership  contracts  and  from  further  restructuring 
efforts  in  state-owned  enterprises.  Some  of  the  envisaged  savings  will  result  from  a 
frontloading of the measures which have been devised in the framework of the public 
expenditure review (PER).  

(11)  Whilst the former measures are of a permanent nature, the government will also adopt 
non-permanent  measures  including  a  front-loading  of  revenues  from  the  EU  Funds, 
inter alia through the transfer of Cohesion Fund resources from less mature projects to 
more advanced ones, and a further reduction in capital expenditure (Polis programme). 

(12)  On top of some of the consolidation measures included in the supplementary budget, 
all  other  legislative  changes  and  legislative  proposals  required  to  implement  the 
reforms  linked  to  the  PER  will  be  adopted  by  the  Government  or  submitted  to  the 
Parliament, as the case may be, by the end of the legislative session in mid-July 2013. 

(13)  For  2014,  the  fiscal  adjustment  will  proceed  on  the  basis  of  the  PER  which  the 
government has undertaken over the past months and includes permanent expenditure-
reducing  measures  of  2 percent  of  GDP  in  2014.  The  main  impact  of  the  PER 
measures will be along three main axes: (1) reduction of the public sector wage bill; 
(2)  reduction  of  pension  benefits  and  (3)  sectoral  expenditure  cuts  across  line 
ministries and programmes. The PER measures are part of a wider effort to reform the 
state with the objective of increasing equity and efficiency in the provision of social 
transfers and public services. The reduction in the wage bill in 2014 aims at reducing 
the size of the public-sector work force while shifting its composition towards higher-
skilled  employees,  aligning  the  public  sector  work  rules  with  those  of  the  private 
sector and making the remuneration policy more transparent and merit-based. Specific 
reforms  include  the  transformation  of  the  Special  Mobility  Scheme  into  a 
Requalification  Programme,  aligning  public  sector  working  hours  with  those  in  the 
private sector (i.e. increase from 35 to 40 hours work week), introduction of a bank of 
hours,  reduction  in  holiday  entitlements,  the  implementation  of  a  voluntary 
redundancy  scheme  (which  is  estimated  to  generate  one-time  upfront  cost  of  about 
0.3 percent  of  GDP)  and  the  introduction  of  a  single  wage  and  supplement  scale.  A 
comprehensive pension reform will generate another important part of the savings and 
will  be  based  on  equity  principles  and  income  progressivity,  thereby  protecting  the 
lowest pensions. Specifically, the reforms will aim at reducing the current differences 

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between  the  civil  servants'  system  (CGA)  and  the  general  system,  increasing  the 
statutory  retirement  age  by  changes  to  the  sustainability  factor  and  introducing  –  if 
strictly  needed  –  a  progressive  sustainability  contribution.  Finally,  savings  in 
intermediate consumption and expenditure programmes across line ministries will be 
stepped up. 

(14) 

In  view  of  political  and  legal  risks  in  the  implementation  process,  some  of  the  PER 
measures may be replaced by others of equivalent size and quality during the ongoing 
consultation process with social and political partners. 

(15)  The budgetary adjustment process is flanked by a range of fiscal structural measures to 
enhance  control  over  government  expenditure  and  improve  revenue  collection.  In 
particular, a comprehensive reform of the budgetary framework, including at central, 
regional  and  local  government  levels,  is  bringing  it  in  line  with  best  practices  in 
budgetary  procedures  and  management.  The  new  commitment  control  system  is 
showing  results  but  implementation  needs  to  be  monitored  closely  to  ensure  that 
commitments  are  in  line  with  funding.  Reforms  in  the  public  administration  will 
continue  with  an  important  rationalisation  of  public  employment  and  public  entities. 
Progress  in  the  reform  agenda  of  the  revenue  administration  continues  and  the 
authorities  are  enhancing  monitoring  and  strengthening  revenue  compliance.  The 
renegotiation  of  Public-Private-Partnerships  has  started  and  significant  savings  are 
projected  for  2013  and  beyond.  State-owned  enterprises  reached  operational  balance 
on average by the end of 2012 and additional efficiency seeking reforms are foreseen 
to  further  improve  the  results.  Reforms  in  the  health  care  sector  are  producing 
significant savings and implementation is continuing broadly in line with targets. 

(16)  Under the Commission's current projections for nominal GDP growth (-1.0 percent in 
2013, 1.6 percent in 2014 and 3.3 percent in 2015) and the general government deficit 
of 5.5 percent of GDP in 2013, 4.0 percent of GDP in 2014 and 2.5 percent of GDP in 
2015, the debt-to-GDP ratio is expected to develop as follows: 122.9 percent of GDP 
in 2013, 124.2 percent of GDP in 2014 and 123.1 percent of GDP in 2015. Hence, the 
debt-to-GDP ratio would be placed on a downward path after 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.  

(17) 

In  2012,  the  bank  capital  augmentation  exercise  was  completed  and  allowed  the 
participating banks to meet the EBA regulatory capital buffers as well as the end-of-
year 10 percent Core Tier 1 programme target. The indicative loan-to-deposit target of 
120 percent by 2014 is likely to be met, with some banks already below this threshold. 
Efforts  to  diversify  the  sources  of  funding  for  the  corporate  sector  are  being 
strengthened.  The  scope  for  improving  the  performance  and  governance  of  existing 
government-sponsored  credit  lines  is  being  assessed.  The  banks'  recovery  plans  are 
being analysed and resolution plans prepared.  

(18)  Further  progress  has  been  made  in  implementing  growth-  and  competitiveness-
enhancing  structural  reforms.  In  addition  to  strengthening  active  labour  market 
policies, the authorities have adopted a comprehensive labour market reform. With a 
view to promoting labour market flexibility and job creation, the new legal framework 
reduces severance payments, eases condition of fair dismissals, increases working time 
flexibility,  enlarges  possibilities  for  bargaining  at  firm  level  and  revises  the 
unemployment  insurance  benefits  system  to  increase  incentives  for  a  rapid  return  to 

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work,  while  guaranteeing  a  sufficient  level  of  protection.  The  implementation  of  the 
action  plans  on  secondary  school  and  vocational  training  is  overall  progressing  as 
scheduled. 

(19)  The implementation of the Services Directive aiming at reducing barriers to entry and 
boost competition and economic activity by facilitating access for new entrants to the 
market  in  the  different  economic  regimes  is  proceeding  at  good  pace.  A  Framework 
Law  to  set  the  main  principles  of  the  functioning  of  the  most  important  National 
Regulator  Authorities  (NRA),  including  their  endowment  with  strong  independence 
and autonomy is to be submitted to the Parliament. Significant progress has been made 
in  the  transposition  of  the  Third  Energy  Package  and  the  electricity  tariff  debt 
reduction to ensure the sustainability of the system is on-going. Licensing procedures 
and  other  administrative  burdens  are  being  simplified  in  different  economic  sectors 
such  as  environment  and  territorial  planning,  agriculture  and  rural  development, 
industry, tourism or geology. 

(20)  A  comprehensive  reform  of  the  housing  rental  market  has  entered  into  force  in 
November  2012  which  should  make  the  housing  market  more  dynamic.  Reforms  of 
the judicial system are advancing according to the agreed schedule. Progress has been 
achieved  on  the  reduction  of  backlog  cases  and  broader  reforms  such  as  the 
geographical reorganisation of the court districts and the reform of the Code of Civil 
Procedure. 

HAS ADOPTED THIS DECISION:  

Article 1 

1. 

(a) 

Article 1 of Implementing Decision 2011/344/EU is amended as follows: 

Paragraph 1 is replaced by the following: 

‘1. The Union shall make available to Portugal a loan amounting to a maximum of EUR 26 
billion, with a maximum average maturity of 19.5 years. The maturity of individual tranches 
of the loan facility may be of up to 30 years.’ 

(b) 

The following paragraph is added: 

‘9. At the request of Portugal, the Commission may extend the maturity of an instalment or a 
tranche, provided that the maximum average maturity as set out in paragraph 1 is respected. 
The  Commission  may  refinance  all  or  part  of  its  borrowing  for  that  purpose.  Any  amounts 
borrowed  in  advance  shall  be  kept  on  an  account  with  the  ECB  that  the  Commission  has 
opened for the administration of the financial assistance.’ 

2. 

(a) 

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

Paragraphs 3 and 4 are replaced by the following: 

‘3. The general government deficit shall not exceed 5.9 percent of GDP in 2011, 5.0 percent 
of  GDP  in  2012,  5.5 percent  of  GDP  in  2013  and  4 percent  of  GDP  in  2014.  For  the 
calculation  of  this  deficit,  the  possible  budgetary  costs  of  bank  support  measures  in  the 
context  of  the  Portuguese  Government’s  financial  sector  strategy  shall  not  be  taken  into 
account. The budgetary consolidation shall be achieved by means of high-quality permanent 
measures and minimising the impact 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 

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Memorandum  of  Understanding.  Portugal  shall  stand  ready  to  take  additional  consolidation 
measures to achieve the deficit targets throughout the Programme period.’ 

(b) 

Paragraphs 7 to 9 are replaced by the following: 

‘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 5.5 percent of GDP in 2013. 
The consolidation  measures  included  in  the  2013  budget,  including  in  the 
supplementary  budget  to  be  adopted  by  end-May,  shall  be  implemented 
throughout  the  year.  Revenue-raising  measures  include  a  reform  of  the 
personal  income  tax  that  simplifies  the  tax  structure,  broadens  the  tax  base 
through the elimination of some tax benefits and increases the average tax rate, 
while preserving progressivity; a broadening of the corporate income tax base; 
an  increase  in  excise  taxes  and  in  recurrent  property  taxation  and  a 
extraordinary solidarity contribution on pensions. Expenditure-saving measures 
include  a  rationalisation  of  public  administration,  education,  health  care  and 
social  benefits;  a  reduction  of  the  wage  bill  by  decreasing  permanent  and 
temporary  staff  and  reducing  overtime  pay;  a  lowering  of  operational  and 
capital  expenditures  by  state-owened  enterprises;  renegotiations  of  contracts 
with  public-private  partnerships;  and  cutbacks  in  intermediate  consumption 
across line ministries;  

(b)  Some  of  the  measures  derived  from  the  public  expenditure  review  shall  be 
frontloaded  to  2013.  These  mainly  consist  in  a  further  reduction  in  public 
employment through the transformation of the Special Mobility Scheme into a 
Requalification  programme,  the  convergence  of  public  and  private  sector 
working rules, especially by raising working hours in the public sector from 35 
to  40  hours  per  week,  the  increase  of  public  employees'  contributions  to  the 
special  health  insurance  schemes  and  the  reduction  of  fringe  benefits. 
Rationalisation  efforts  across  line  ministries  shall  be  deepened  beyond  the 
original  budget  plans  and  social  spending  shall  be  further  streamlined.  In 
addition,  the  above-mentioned  permanent  measures  should  be  complemented 
by temporary measures, to be replaced by permanent ones in 2014, consisting 
in  particular  in  a  front-loading  of  revenue  from  the  EU  Funds  and  a  further 
reduction in capital expenditure (Polis programme); 

(c)  On  top  of  some  of  the  consolidation  measures  included  in  the  supplementary 
budget,  all  other  legislative  changes  and  legislative  proposals  required  to 
implement the reforms linked to the PER shall be adopted by the Government 
or submitted to the Parliament, as the case may be, by the end of the legislative 
session in mid-July 2013; 

(d)  Portugal shall continue implementing its privatisation programme; 

(e)  Portugal  shall  coordinate  the  exchange  of  information  across  levels  of 
government  to  facilitate  revenue  forecasting  for  the  2014  budgets  of  the 
Autonomous Regions and the local authorities; 

(f)  Portugal shall deepen the use of shared services in public administration; 

(g)  Portugal shall reduce the number of local branches of line ministries (e.g. tax, 
social  security,  justice)  by  merging  them  in  citizens'  shops  and  developing 
further the e-administration over the duration of the programme; 

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(h)  Portugal  shall  continue  the  reorganisation  and  rationalisation  of  the  hospital 
network  through  specialisation,  concentration  and  downsizing  of  hospital 
services,  joint  management  and  joint  operation  of  hospitals.  Finalise  the 
implementation of the action plan by the end of 2013; 

(i)  With the support of internationally-reputed experts and following the adoption 
of  the  amendments  to  the  New  Urban  Lease  Act  Law  6/2006  and  the  Decree 
Law  which  simplifies  the  administrative  procedure  for  renovation,  Portugal 
shall  undertake  a  comprehensive  review  of  the  functioning  of  the  housing 
market; 

(j) 

Portugal  shall  develop  a  nationwide  land  registration  system  to  allow  a  more 
equal distribution of benefits and costs in the execution of urban planning; 

(k)  Portugal shall implement the measures set out in its action plans to improve the 
quality  of  secondary  and  vocational  education  and  training,  in  particular  the 
management  tool  to  analyse,  monitor  and  assess  the  results  and  impacts  of 
education  and  training  policies  shall  be  made  fully  operational  and  the 
professional schools of reference shall be established; 

(l) 

Portugal shall complete the adoption of the outstanding sectorial amendments 
necessary to fully implement the Services Directive; 

(m)  Portugal shall implement targeted measures to achieve steady reduction of the 
backlogged enforcement cases in view of resolving the backlog of court cases; 

(n)  Portugal  shall  submit  to  Parliament  Framework  Law  on  the  main  National 
Regulatory  Authorities  in  order  to  guarantee  their  full  independence  and 
financial, administrative and management autonomy; 

(o)  Portugal  shall  improve  the  business  environment  by  completing  pending 
reforms  on  the  reduction  of  administrative  burden  [fully  operational  Point  of 
Single  Contact  (PSC)  and  'Zero  Authorisation'  projects]  and  by  carrying  out 
further  simplification  of  existing  licensing  procedures,  regulations  and  other 
administrative  burdens  in  the  economy  which  are  a  major  obstacle  for  the 
development of economic activities;  

(p)  Portugal shall complete the reform of the ports' governance system, including 

the overhaul of port operation concessions; 

(q)  Portugal  shall  implement  the  measures  enhancing  the  functioning  of  the 

transport system; 

(r)  Portugal  shall  implement  the  measures  eliminating  the  energy  tariff  debt  and 

fully transpose the Third EU Energy Package; 

(s)  Portugal  shall  ensure  that  the  new  legal  and  institutional  PPP  framework  is 
applied and the PPP road contracts continue to be renegotiated in line with the 
strategic plan presented by the government and with the regulatory framework 
revision, in order to obtain substantial fiscal gains, particularly in 2013; 

(t) 

Portugal shall continue to focus on measures to combat tax fraud and evasion 
and strengthen taxpayers' compliance. 

(u)  Portugal  shall  introduce  adjustments  to  the  severance  payments  regime  in 

accordance with the provisions of the Memorandum of Understanding; 

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(v)  Portugal  shall  promote  wage  developments  consistent  with  the  objectives  of 
fostering  job  creation  and  improving  firms’  competitiveness  with  a  view  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; 

(w)  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. 

8. The general government deficit shall not exceed 4.0 percent of GDP in 2014. To achieve 
this objective Portugal shall implement the expenditure-reducing measures that were prepared 
in  the  framework  of  the  public  expenditure  review.  Overall,  the  amount  of  these  measures 
shall  add  up  to  2  percent  of  GDP  in  2014  and  shall  include  the  reduction  in  the  wage  bill 
aimed  at  reducing  the  size  of  the  public-sector  work  force  while  changing  its  composition 
towards  higher-skilled  employees;  further  convergence  of  public  and  private  sector  work 
rules,  i.e.  increase  in  working  hours,  introduction  of  a  bank  of  hours,  reduction  in  holiday 
entitlements;  the  implementation  of  a  voluntary  redundancy  scheme;  a  reduction  of  the 
current differences between the civil servants' pension regime (CGA) and the general pension 
system;  an  increase  in  the  statutory  retirement  age;  and  –  if  strictly  needed  –  a  progressive 
sustainability  contribution  on  pensions.  Furthermore,  savings  in  intermediate  consumption 
and  expenditure  programs  across  line  ministries  shall  be  stepped  up.  Some  of  the  measures 
may be partly or fully replaced by others of equivalent size and quality. 

9. With a view to restoring confidence in the financial sector, Portugal shall aim to maintain 
an adequate level of capital in its banking sector and ensure an orderly deleveraging process 
in  compliance  with  the  deadlines  set  in  the  Memorandum  of  Understanding.  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) 

(b) 

(c) 

advise banks to strengthen their collateral buffers on a sustainable basis; 

ensure  a  balanced  and  orderly  deleveraging  of  the  banking  sector,  which 
remains  critical  in  permanently  eliminating  funding  imbalances.  and  reducing 
the  reliance  on  Eurosystem  funding  in  the  medium-term.  Banks  funding  and 
capital plans shall be reviewed quarterly; 

encourage the diversification of financing alternatives for the corporate sector 
and in particular the SMEs through an array of measures aiming at improving 
their access to the capital markets and export credit insurance; 

(d) 

continue to streamline the state-owned CGD group; 

(e)  optimise the process for recovering the assets transferred from BPN to the three 
state-owned special purpose vehicles 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  the  on-going  competitive  bidding  process  and 
include  adequate  incentives  to  maximise  the  recoveries  and  minimise 
operational  costs  into  the  mandate.  The  Portuguese  Government  shall  ensure 
timely disposal of the subsidiaries and the assets in the other two state-owned 
special purpose vehicles; 

(f) 

on the basis of the set of preliminary proposals to encourage the diversification 
of  financing  alternatives  to  the  corporate  sector  presented,  develop  and 

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(g) 

(h) 

(i) 

implement  solutions  that  provide  financing  alternatives  to  traditional  bank 
credit  for  the  corporate  sector.  The  Portuguese  Government  shall  assess  the 
effectiveness of government-sponsored export credit insurance schemes with a 
view  to  taking  appropriate  measures  compatible  with  EU  law  to  promote 
exports; 

analyse  banks'  recovery  plans  and  issue  guidelines  to  the  system  on  recovery 
plans and prepare resolution plans on the basis of the reports submitted by the 
banks.  Ensure  the  initial  and  annual  funding  arrangements  for  the  Resolution 
Fund  are  settled.  The  implementation  of  the  recovery  and  resolution  plans  of 
the banks shall give priority to those that are of systemic importance; 

implement  the  framework  for  financial  institutions  to  engage  in  out-of-court 
debt restructuring for households, smoothen the application for restructuring of 
corporate  debt  and  implement  an  action plan  to  raise  public  awareness  of  the 
restructuring tools; 

Prepare quarterly reports on the implementation of the new restructuring tools 
and  conduct  a  survey  of  insolvency  stakeholders  to  inquire  about  the 
appropriateness  of  the  existing  debt  restructuring  tools  and  possible  gaps  or 
bottlenecks,  explore  alternatives  to  increase  the  successful  recovery  of 
companies  adhering  to  the  PER  (the  Special  Revitalization  Procedure  for 
companies  in  serious  financial  distress)  and  the  SIREVE  (the  Companies’ 
Recovery System through Extrajudicial Agreements for companies in difficult 
economic situation or imminent or actual insolvency); 

(j) 

assess  the  scope  for  improving  the  performance  and  governance  of  existing 
government-sponsored  credit  lines,  establish  a  quarterly  monitoring  and 
reporting  mechanism  on  the  allocation  of  the  government  sponsored  credit 
lines aimed at facilitating access to finance to SMEs; conduct an external audit 
of the National Guarantee System.’ 

This Decision is addressed to Portugal.  

Article 2 

Article 3 

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

Done at Brussels,  

For the Council 
The President 

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