Recommendation for a COUNCIL RECOMMENDATION on the 2017 National Reform Programme of Portugal and delivering a Council opinion on the 2017 Stability Programme of Portugal
Date: 2017-05-22
Institutions: European Commission, Secretariat-General
Subjects: Portugal, administrative formalities, budget deficit, credit policy, economic policy, economic reform, employment policy, pay policy, public finance, stability programme

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   EUROPEAN COMMISSION  Brussels, 22.5.2017  COM(2017) 521 final   Recommendation for a COUNCIL RECOMMENDATION on the 2017 National Reform Programme of Portugal  and delivering a Council opinion on the 2017 Stability Programme of Portugal  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2017 National Reform Programme of Portugal 

and delivering a Council opinion on the 2017 Stability Programme of Portugal 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies,1 and in particular Article 5(2) thereof, 

Having  regard  to  Regulation  (EU)  No 1176/2011  of  the  European  Parliament  and  of  the 
Council  of  16 November  2011  on  the  prevention  and  correction  of  macroeconomic 
imbalances,2 and in particular Article 6(1) thereof, 
Having regard to the recommendation of the European Commission,3 
Having regard to the resolutions of the European Parliament,4 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

On  16 November  2016,  the  Commission  adopted  the  Annual  Growth  Survey,5 
marking  the  start  of  the  2017  European  Semester  of  economic  policy  coordination. 
The priorities of the Annual Growth Survey were endorsed by the European Council 
on  9-10 March  2017.  On  16 November  2016,  on  the  basis  of  Regulation  (EU) 
No 1176/2011,  the  Commission  adopted  the  Alert  Mechanism  Report,6  in  which  it 
identified Portugal as one of the Member States for which an in-depth review would 
be carried out. On the same day, the Commission also adopted a recommendation for 
a  Council  Recommendation  on  the  economic  policy  of  the  euro  area.  That 

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OJ L 209, 2.8.1997, p. 1. 
OJ L 306, 23.11.2011, p. 25. 
COM(2017) 521 final. 
P8_ TA(2017)0038, P8_ TA(2017)0039, and P8_ TA(2017)0040. 
COM(2016) 725 final. 
COM(2016) 728 final. 

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(3) 

(4) 

Recommendation  was  endorsed  by  the  European  Council  on  9-10 March  2017  and 
adopted by the Council on 21 March7. 

As  a  country  whose  currency  is  the  euro  and  in  view  of  the  close  interlinkages 
between the economies in the economic and monetary union, Portugal should ensure 
the full and timely implementation of the Recommendation for the euro area which is 
reflected in recommendations 1 to 4 below. 
The  2017  country  report  for  Portugal8  was  published  on  22 February  2017.  It 
assessed  Portugal’s  progress  in  addressing  the  country-specific  recommendations 
adopted by the Council on 12 July 2016, the follow-up given to the recommendations 
adopted in previous years and Portugal’s progress towards its national Europe 2020 
targets.  It  also  included  an  in-depth  review  under  Article 5  of  Regulation  (EU) 
No 1176/2011, the results of which were also published on 22 February 2017.9 The 
Commission’s  analysis  leads  it  to  conclude  that  Portugal  is  experiencing  excessive 
macroeconomic imbalances. In particular, the large stocks of net external liabilities, 
private  and  public  debt  and  a  high  share  of  non-performing  loans  constitute 
vulnerabilities  in  a  context  of  high  but  decreasing  unemployment  and  slow 
productivity  growth.  Potential  growth  lags  behind  its  pre-crisis  level,  affected  by 
persistent bottlenecks and rigidities in the product and labour markets, together with 
external imbalances. The current account balance shows some improvements, though 
additional  effort  is  required  for  a  more  significant  adjustment  of  net  external 
liabilities. Following a significant adjustment in recent years, unit labour costs started 
increasing  due  to  sluggish  productivity  growth  and  rising  wages.  Private  debt  is 
falling, and  government  debt  has  stabilised, in  a  context  of  remaining  deleveraging 
needs.  The  stock  of  non-performing  loans  remains  high  and,  together  with  low 
profitability  and  relatively  thin  capital  buffers,  they  pose  risks  to  banks’  balance 
sheets.  Labour  market  conditions  have  improved  but  youth  and  long-term 
unemployment, as well as the share of temporary employees, are still high. 

On 28 April 2017, Portugal submitted its 2017 National Reform Programme and its 
2017  Stability  Programme.  To  take  account  of  their  interlinkages,  the  two 
programmes  have  been  assessed  at  the  same  time.  Portugal’s  National  Reform 
Programme includes commitments both for the short and medium term. In particular, 
it includes measures to improve the management of public finances and the business 
environment  and  to  tackle  corporate  debt.  It  commits  with  ambitious  reforms  to 
modernise  the  public  administration,  increase  social  protection,  upgrade  the  skill 
level of the labour force and improve governance in State-owned enterprises. It also 
covers the challenges identified in the 2017 country report and the Recommendation 
for  the  Euro  Area,  including  the  need  to  re-launch  investment  and  ensure  the 
sustainability of public finances. If fully implemented within the indicated timelines, 
these  measures  would  help  address  Portugal’s  macroeconomic  imbalances  and 
country-specific  recommendations.  Based  on  the  assessment  of  Portugal’s  policy 
commitments, the Commission confirms its previous assessment that at this stage no 
further  steps  are  warranted  in  the  framework  of  the  Macroeconomic  Imbalances 
Procedure. The implementation of the policy reform agenda will be followed closely 
by means of specific monitoring. 

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2017/C92/01. 
SWD(2017) 87 final. 
COM(2017) 90 final. 

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The relevant country-specific recommendations have been taken into account in the 
Member States' programmes for the European Structural and Investment Funds (ESI 
Funds) covering the 2014-2020 period. As foreseen in the legislation governing the 
ESI Funds,10 where it is necessary to support the implementation of relevant country-
specific  recommendations,  the  Commission  may  request  a  Member  State  to  review 
and  amend  its  relevant  ESI  Funds  programmes.  The  Commission  has  provided 
further guidelines on the application of those rules.11 

Following  the  abrogation  of  the  excessive  deficit  procedure,  Portugal  is  in  the 
preventive arm of the Stability and Growth Pact and subject to the transitional debt 
rule.  In  its  2017  Stability  Programme,  Portugal  plans  to  attain  a  headline  deficit  of 
1.5%  of  GDP  and  1.0%  of  GDP  in  2017  and  2018,  respectively,  and  a  further 
improvement to a surplus of 0.4% of GDP in 2020. Those plans do not include the 
potential  deficit-increasing  impact  of  bank  support  measures.12  The  medium-term 
budgetary  objective  –  a  structural  surplus  of  0.25  %  of  GDP  –  is  planned  to  be 
achieved  by  2021.  The  Stability  Programme  projects  the  government  debt-to-GDP 
ratio to reach 127.9% in 2017 and 124.2% in 2018, which would then be at 117.6% 
in  2020.  The  macroeconomic  scenario  underpinning  these  budgetary  projections  is 
plausible  for  2017  but  favourable  for  the  following  years.  At  the  same  time,  the 
measures needed to support the planned deficit targets from 2017 onwards have not 
been sufficiently specified. 

On  12  July  2016,  the  Council  recommended  Portugal  to  achieve  an  annual  fiscal 
adjustment of at least 0.6% of GDP towards the medium-term budgetary objective in 
2017. Based on the Commission 2017 spring forecast, there is a risk of a significant 
deviation from that requirement in 2017.  

In  2018,  in  light  of  its  fiscal  situation  and  notably  of  its  debt  level,  Portugal  is 
expected  to  further  adjust  towards  its  medium-term  budgetary  objective  of  a 
structural surplus of 0.25 % of GDP. According to the commonly agreed adjustment 
matrix  under  the  Stability  and  Growth  Pact,  that  adjustment  translates  into  a 
requirement  of  a  nominal  growth  rate  of  net  primary  government  expenditure13  
which  does  not  exceed  0.1%.  It  would  correspond  to  a  structural  adjustment  of  at 
least  0.6%  of  GDP.  Under  unchanged  policies,  there  is  a  risk  of  a  significant 
deviation  from  that  requirement  in  2018.  Portugal  is  prima  facie  not  forecast  to 
comply  with  the transitional debt rule in 2017 and  2018. Overall, the Council is  of 
the  opinion  that  further  measures  will  be  needed  as  of  2017  to  comply  with  the 
provisions  of  the  Stability  and  Growth  Pact.  However,  as  foreseen  in  Regulation 

Article  23  of  Regulation  (EU)  No  1303/2013  of  the  European  Parliament  and  of  the  Council  of  17 
December  2013  laying  down  common  provisions  on  the  European  Regional  Development  Fund,  the 
European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and 
the  European  Maritime  and  Fisheries  Fund  and  laying  down  general  provisions  on  the  European 
Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime 
and  Fisheries  Fund  and  repealing  Council  Regulation  (EC)  No  1083/2006,  OJ  L  347,  20.12.2013,  p. 
320. 
COM(2014) 494 final. 
Commission Decision of 10 March 2017 – SA.47178 – Portugal – Recapitalisation of Caixa Geral de 
Depósitos, S.A. 
Net  government  expenditure  is  comprised  of  total  government  expenditure  excluding  interest 
expenditure,  expenditure  on  Union  programmes  fully  matched  by  Union  funds  revenue  and  non-
discretionary  changes  in  unemployment  benefit  expenditure.  Nationally  financed  gross  fixed  capital 
formation  is  smoothed  over  a  4-year  period.  Discretionary  revenue  measures  or  revenue  increases 
mandated by law are factored in. One-off measures on both the revenue and expenditure sides are netted 
out. 

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(10) 

(EC) No 1466/97, the assessment of the budgetary plans and outcomes should take 
account of the Member State's budgetary balance in light of the cyclical conditions. 
As recalled in the Commission Communication accompanying these country-specific 
recommendations, the assessment of the 2018 Draft Budgetary Plan and subsequent 
assessment  of  2018  budget  outcomes  will  need  to  take  due  account  of  the  goal  to 
achieve a fiscal stance that contributes to both strengthening  the ongoing recovery 
and  ensuring  the  sustainability  of  Portugal’s  public  finances.  In  that  context,  the 
Commission intends to make use of the applicable margin of appreciation in light of 
the cyclical situation of Portugal. 

A solid budgetary consolidation relies on the timely and strict implementation of the 
new budget framework law, reviewing and rationalising public spending and further 
improving  revenue  collection.  Portugal  has  started  a  spending  review  exercise, 
mainly based on efficiency measures that involve the health and education ministries, 
state-owned  enterprises  and  (centralised)  public  procurement  and  real  estate 
management.  However,  this  spending  review  falls  short  of  a  comprehensive 
approach  since  it  only  covers  the  central  government  and  focuses  on  efficiency 
savings  stemming  from  streamlining  services.  In  the  health  sector,  the  government 
has  adopted  measures  aimed  at  promoting  disease  prevention  and  public  health 
policies.  Moreover,  several  steps  have  been  taken  to  make  the  health  care  sector 
more  efficient  and  sustainable,  for  example  via  centralised  procurement  or  greater 
use  of  generics.  At  the  same  time,  while  the  hospital  reform  continues,  budgetary 
planning and implementation in hospitals remains an important issue. Late payments 
in  accounting  control 
increase,  denoting  weaknesses 
(arrears)  continue 
mechanisms  and  managerial  practices.  Accurate  and  balanced  budgeting,  improved 
controls and effective enforcement of the commitment control law could help reduce 
arrears and improve efficiency and quality in this sector. High and rising ageing costs 
still  pose  a  risk  to  fiscal  sustainability.  In  the  medium  term,  higher  fiscal  risks  are 
expected  to  be  related  largely  to  the  costs  of  financing  pensions.  Long-term  fiscal 
risks  in  the  country  are  assessed  as  low,  largely  thanks  to  pension  reforms  and 
assuming  a  no-policy  change  scenario  and  that  there  is  a  further  reduction  in  the 
reliance  of  the  pension  system  on  budgetary  transfers.  The  restructuring  of  state-
owned  enterprises  to  make  them  fiscally  sustainable  has  not  still  been  fully 
addressed.  State-owned  enterprises  supervised  by  the  Ministry  of  Finance’s 
monitoring  unit  (UTAM)  had  a  total  indebtedness  of  EUR 32  billion  in  the  second 
quarter  of  2016.  A  framework  with  established  targets  to  guarantee  the  financial 
sustainability of state-owned enterprises could help to decrease their dependence on 
State budget transfers and tackle the large debt stock.  

to 

in 

in 

labour  market 

indicators  and  notably  a  decrease 

The  Portuguese  labour  market  continued  to  recover  in  2016,  with  a  steady 
improvement 
the 
unemployment  rate.  A  significant  share  of  new  jobs  created  are  on  open-ended 
contracts.  However,  the  stock  of  temporary  contracts  remains  stable  at  high  levels. 
High  labour  market  segmentation  adversely  affects  workers’  career  prospects  and 
incomes,  in  particular  among  the  young.  In  January  2017,  Portugal  redesigned  its 
employment  support  programme  to  promote  hiring  on  open-ended  contracts. 
However, its expected impact on reducing segmentation appears limited, as relatively 
few  people  are  expected  to  be  covered  by  the  programme.  Although  recent  labour 
market  reforms  improved  incentives  for  job  creation,  some  aspects  of  the  legal 
framework may still discourage firms from hiring workers on open-ended contracts. 
In  particular,  employers  face  high  and  uncertain  firing  costs  in  case  of  individual 
dismissal  of  permanent  workers.  This  is  due  in  part  to  the  possibility  of  a  worker 

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being  reinstated  if  the  dismissal  is  deemed  unfair,  and  to  inefficiencies  in  legal 
proceedings. 

(11)  With  the  drop  in  unemployment  since  2014,  the  absolute  number  of  the  long-term 
unemployed is also decreasing. However, more than half of unemployed people have 
been jobless for a year or more, and this share is not decreasing with the recovery. 
High  levels  of  long-term  and  youth  unemployment  increase  the  risk  that  jobless 
people  will  disengage  from  the  labour  market,  gradually  losing  their  skills  and 
employability, 
thus  also  weighing  negatively  on  potential  growth.  Youth 
unemployment, while still sizeable, is declining owing to a range of measures taken 
in previous years, including through outreach measures in the context of the Youth 
Guarantee.  This  may  partly  explain  why  the  share  of  young  people  neither  in 
employment  nor  in  education  or  training  (NEET)  is  lower  than  the  EU  average. 
Portugal  is  also  taking  action  to  streamline  active  labour  market  policies  and  to 
address  the  issue  of  the  youth  unemployment.  This  includes  the  introduction  of 
employment  incentives  (through  social  security  rebates)  in  April  2017,  targeted  to 
the hiring of young and long-term unemployed on open-ended contracts. However, to 
ensure  effective  activation  of  the  long-term  unemployed,  it  is  crucial  that  public 
employment services cooperate effectively with social services to better identify and 
address the needs of this group. An important step in this direction would be to create 
the announced one-stop shops for employment.  

(12) 

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By  following  the  announced  schedule,  the  government  has  increased  the  minimum 
wage  for  the  third  consecutive  year  in  2017.  The  last  increase,  above  expected 
inflation and average productivity increases, is expected to make the minimum wage 
increasingly binding, as the share of employees covered already amounted to a fifth 
of  the  total  in  2016.  Minimum  wage  increases  contribute  to  reducing  high  in-work 
poverty and may positively impact on aggregate demand. However, they may entail 
employment risks, notably for the low-skilled. These risks did not materialise in the 
current  context  of  recovery,  but  remain  a  challenge.  The  government  is  monitoring 
the  impact  of  minimum  wage  developments  through  quarterly  reports,  which  are 
published and discussed with social partners. 

Portugal  has  made  significant  improvements  in  its  school  education  outcomes,  as 
shown  by  the  most  recent  PISA  results.  However,  the  country  remains  among  the 
OECD  countries  with  the  highest  rates  of  grade  repetition,  which  is  proven  to 
increase the risk of early school leaving and weighs significantly on education costs. 
The overall skills level of the labour force remains among the lowest in Europe and 
hampers  the  country’s  innovation  potential  and  competitiveness.  Moreover,  digital 
skills remain a barrier for upgrading the labour force skills. About 22 % of people in 
the Portuguese labour force have no digital skills (mostly because they do not use the 
internet regularly), about double the EU average. The government has taken action to 
promote  adult  education,  namely  by  establishing  the  ‘Qualifica’  centres  and 
‘passport’.  To  ensure  they  are  effective,  it  will  be  crucial  that  they  provide  quality 
opportunities  for  up-skilling  and  re-skilling  workers,  in  line  with  labour  market 
needs. The government has also taken a number of measures to support cooperation 
between  higher  education  and  the  business  sector,  namely  regarding  their  research 
outcomes  and  activities.  However,  the  university  structures  would  need  to  adapt  in 
order to favour this cooperation. 

(14) 

The  large  stock  of  corporate  non-performing  loans,  low  profitability,  exposure  to 
sovereign  debt  risks  and  weak  capital  buffers  are  putting  pressure  on  the  banking 
sector. The deterioration in the quality of assets, in particular in the corporate sector, 

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weighs on the banking sector’s profitability. It is one of the factors, along with low 
capital  buffers, that  impede  the  productive  allocation  of  credit  and investment.  The 
non-performing loan ratio remains high (20.1 % against 19.6 % at the end of 2015) 
and  is still rising  for some  sectors of the economy, in  particular  firms  active in the 
construction and real estate sectors. Some steps have been taken recently to address 
the large stock of non-performing loans. However, a comprehensive strategy is still 
needed  to  ensure  a  significant  reduction  of  the  impaired  debt  stock,  including 
fostering the development of secondary markets in order to enable banks to sell parts 
of their distressed portfolios.  

to  finance, 

their  access 

thereby  helping  firms 

Credit conditions have been gradually improving on the demand and the supply side 
but  access  to  finance  remains  a  major  concern  for  SMEs.  The  percentage  of 
Portuguese SMEs which did not manage to obtain the full amount of loans requested 
rose  from  34 %  to  42 %,  against  a  falling  EU  average  that  reached  30 %  in  2016. 
Innovative  and  competitive  firms  with  strong  growth  potential  would  benefit  from 
better  access  to  capital.  This  would  reduce  their  dependence  on  debt  financing  and 
to  scale-up  and 
improve 
internationalise.  The  difference  in  the  cost  of  capital  between  investments  financed 
by debt and the ones financed through equity in 2016 was the fifth highest in the EU 
and well above the EU average. Although the changes to the tax regime have reduced 
incentives to debt financing, it is too early to see any impact on the relatively high 
debt bias in corporate taxation. In July 2016, the authorities launched the Capitalizar 
programme  designed  mainly  to  encourage  private  investment.  The  programme 
establishes  new  credit  lines  for  SMEs,  creates  specialised  funds  that  would 
participate in private investments and introduces changes to the tax regime to support 
investment.  In  parallel,  the  government  has  put  in  place  another  programme 
(Programa  Semente)  to  provide  finance  to  start-ups  and  small  enterprises  in  their 
early stages (seed capital). The programme will help them to raise equity finance by 
offering  tax  reliefs,  for  at  least  2  years,  to  individual  investors  who  purchase  new 
shares in such companies. Both programmes are expected to improve the financing 
of companies in Portugal, provided that they are swiftly and fully implemented. 

In  January  2017,  as  part  of  a  package  of  measures  to  tackle  barriers  in  services 
markets,14  the  Commission  provided  guidance  to  all  Member  States  on  national 
reform  needs  for  regulating  professional  services  with  high  growth  and  jobs 
potential. The reform recommendations address a broad range of requirements based 
on a comparative analysis following the spirit and the work carried out in the mutual 
evaluation exercise with Member States in the last 3 years. Portugal has participated 
actively in  this  exercise.  Portugal  explains  in  its  national  action  plan that,  as  major 
reforms and review of the regulated professions have been carried out since 2011, it 
does  not  expect  major  modifications  in  the  coming  years.  The  guidance  offered  by 
the  Commission  complements  the  European  Semester  evaluations  by  specifically 
addressing  the  requirements  applicable  to  these  professions.  There  are  significant 
regulatory  and  administrative  barriers  in  accessing  service  provision  in  several 
sectors.  Reforms  targeting  construction  and  the  most  restrictive  business  services, 
including  regulated  professions,  were  agreed  during  the  financial  assistance 
programme, but have been either halted or reversed. The by-laws regulating certain 
professions are less ambitious than the framework law in terms of opening up these 

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COM(2016)  820  final,  COM(2016)  821  final,  COM(2016)  822  final,  COM(2016)  823  final, 
COM(2016) 824 final. 

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professions to competition. They also raise concerns as regards the direct or indirect 
effect of restricting competition in the market for professional services. 

Low  levels  of  efficiency  and  transparency  persist  in  the  Portuguese  public 
administration.  Competition  in  public  procurement  remains  limited.  Despite 
progress,  there  are  still  shortcomings  as  regards  the  transparency  and  reliability  of 
public  procurement  data  and  procedures.  Transparency  in  concession  contracts  and 
public-private  partnerships  is  still  hindered  by  contracting  authorities  lacking  the 
expertise  needed  to  manage  complex  contracts.  The  use  of  direct  awards  in  public 
procurement  remains  high.  Administrative  burden  and  the  lack  of  homogeneous 
implementing  practices  across  the  country  are  delaying  the  reform  of  procedures. 
Despite  some  progress,  there  have  been  delays  in  simplifying  local  and  central 
administrative  procedures  with  little  coordination  between the  various layers  of  the 
public  administration.  The  Portuguese  authorities  have  approved  a  new 
simplification  programme,  called  SIMPLEX+.  This  contains  a  fairly  ambitious 
package of measures for citizens and businesses. These measures are promising abd 
an early implementation of the SIMPLEX+ package needs to be ensured so that the 
programme  can  start  having  an  effective  impact.  Most  of  the  measures  included  in 
the  package  relevant  to  businesses  are  now  starting  to  be  implemented.  The 
performance  of  the  Portuguese  justice  system  is  still  below  the  EU  average.  In 
Portugal,  efficiency  indicators  for  civil,  commercial  and  tax  litigation  cases  remain 
poor. This has a negative impact on business dynamics and attracting foreign direct 
investment. The efficiency of the tax and administrative courts remains challenging 
in terms of resolution rate, and proceedings are still too long. It still takes up to 40 
months to conclude insolvency court proceedings, raising doubts about the efficiency 
of SIREVE frameworks. 

Portugal is making progress with increasing transparency and combating corruption 
in  public  administration,  but  there  is  no  overarching  strategy.  Anti-corruption 
appears to have become a real priority for the national prosecution services and more 
efficient processes for case and resource management have been put in place. Yet, it 
remains  to  be  seen  whether  these  will  be  reflected  by  improvements  in  final 
conviction  rates  for  high-level  corruption  and  the  application  of  penalties  that 
provide stronger deterrents. On the preventive side, the corruption prevention plans 
set  up  in  each  public  institution  have  so  far  been  largely  formalistic.  They  are  not 
fully  adapted  to  each  organisation  nor  are  they  complemented  by  adequate 
monitoring. 

In  the  context  of  the  European  Semester,  the  Commission  has  carried  out  a 
comprehensive analysis of  Portugal’s economic policy and published it in the 2017 
country report. It has also assessed the Stability Programme and the National Reform 
Programme and the follow-up given to the recommendations addressed to Portugal in 
previous  years.  It  has  taken  into  account  not  only  their  relevance  for  sustainable 
fiscal and socioeconomic policy in Portugal, but also their compliance with EU rules 
and guidance, given the need to strengthen the EU’s overall economic governance by 
providing EU-level input into future national decisions.  

In  the  light  of  this  assessment,  the  Council  has  examined  the  Stability  Programme 
and its opinion15 is reflected in particular in recommendation 1 below. 

In  the  light  of  the  Commission’s  in-depth  review  and  this  assessment,  the  Council 
has  examined  the  National  Reform  Programme  and  the  Stability  Programme.  Its 

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15 

Under Article 5(2) of Council Regulation (EC) No 1466/97. 

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recommendations  made  under  Article  6  of  Regulation  (EU)  No 1176/2011  are 
reflected in recommendations 1 to 4 below, 

HEREBY RECOMMENDS that Portugal take action in 2017 and 2018 to: 

1. 

2. 

3. 

4. 

to  both  strengthening 

Ensure  the  durability  of  the  correction  of  the  excessive  deficit.  Pursue  its  fiscal 
policy  in  line  with  the  requirements  of  the  preventive  arm  of  the  Stability  and 
Growth Pact, which translates into a substantial fiscal effort for 2018. When taking 
policy  action,  consideration  should  be  given  to  achieving  a  fiscal  stance  that 
the 
contributes 
sustainability  of  Portugal’s  public  finances.  Step  up  efforts 
to  finalise  a 
comprehensive expenditure review at all levels of public administration. Strengthen 
expenditure  control,  cost  effectiveness  and  adequate  budgeting,  in  particular  in  the 
health  sector  with  a  focus  on  the  reduction  of  arrears  in  hospitals  and  ensure  the 
sustainability of the pension system. To increase the financial sustainability of state-
owned enterprises set sector-specific efficiency targets in time for the 2018 budget, 
improving state-owned enterprises’ overall net income and decreasing the burden on 
the State budget. 

the  ongoing  recovery  and  ensuring 

Promote  hiring  on  open-ended  contracts,  including  by  reviewing  the  legal 
framework.  Ensure  the  effective  activation  of  the  long-term  unemployed.  Together 
with  social  partners,  ensure  that  minimum  wage  developments  do  not  harm 
employment of the low-skilled.  

Step up efforts to clean up the balance sheets of credit institutions by implementing a 
comprehensive  strategy  addressing  non-performing  loans,  including  by  enhancing 
the secondary market for bad assets. Improve the access to capital, in particular for 
start-ups and small and medium sized enterprises. 

Implement  a  roadmap  to  further  reduce  the  administrative  burden  and  tackle 
regulatory  barriers  in  construction  and  business  services  by  end  2017.  Increase  the 
efficiency of insolvency and tax proceedings.  

Done at Brussels, 

For the Council 
The President 

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