Recommendation for a COUNCIL RECOMMENDATION on the 2019 National Reform Programme of Portugal and delivering a Council opinion on the 2019 Stability Programme of Portugal
Date: 2019-06-05
Institutions: European Commission, Secretariat-General
Subjects: Portugal, budget deficit, economic policy, economic reform, financial solvency, investment, labour market, legal system, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 5.6.2019  COM(2019) 522 final  Recommendation for a COUNCIL RECOMMENDATION on the 2019 National Reform Programme of Portugal and delivering a Council opinion on the 2019 Stability Programme of Portugal    
 
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2019 National Reform Programme of Portugal and delivering a Council opinion 
on the 2019 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 
policies1, 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 
imbalances2, and in particular Article 6(1) thereof,  

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

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 21 November 2018, the Commission adopted the Annual Growth Survey, marking 
the start of the 2019 European Semester for economic policy coordination. It took due 
account  of  the  European  Pillar  of  Social  Rights,  proclaimed  by  the  European 
Parliament, the Council and the Commission on 17 November 2017. The priorities of 
the  Annual  Growth  Survey  were  endorsed  by  the  European  Council  on  21  March 
2019.  On  21  November  2018,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the 
Commission also adopted the Alert Mechanism Report, in which it identified Portugal 
as one of the Member States for which an in-depth review would be carried out. On 
the  same  date,  the  Commission  also  adopted  a  recommendation  for  a  Council 
recommendation on the economic policy of the euro area, which was endorsed by the 
European  Council  on  21  March  2019.  On  9  April  2019,  the  Council  adopted  the 

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OJ L 209, 2.8.1997, p. 1. 
OJ L 306, 23.11.2011, p. 25. 

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(2) 

(3) 

(4) 

(5) 

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recommendation  on  the  economic  policy  of  the  euro  area  (‘Recommendation  for  the 
euro area’).  

As a Member State 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,  as 
reflected in recommendations (1) to (4) below. In particular, focusing economic policy 
related to investment in the specified areas and using windfall gains to reduce public 
debt  will  help  address  the  second  euro  area  recommendation  as  regards  supporting 
investment  and  rebuilding  buffers.  Measures  to  reduce  labour  market  segmentation, 
improve  skills  and  effectiveness  of  social  safety  net  will  help  address  the  third  euro 
area recommendation as regards functioning of the labour market and social protection 
systems.  Measures  to  reduce  regulatory  burden  will  help  address  the  first  euro  area 
recommendation as regards business environment and productivity improvements for 
euro  area  rebalancing.  Increasing  the  efficiency  of  insolvency  and  recovery 
proceedings  will  help  address  the  fourth  euro  area  recommendation  as  regards  the 
reduction of non-performing loans. 
The 2019 country report for Portugal3 was published on 27 February 2019. It assessed 
Portugal’s  progress  in  addressing  the  country-specific  recommendations  adopted  by 
the Council on 13 July 2018, 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  27  February  20194.  The  Commission’s 
analysis led it to conclude that Portugal is experiencing 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  low 
productivity  growth.  Policy  gaps  remain,  notably  in  terms  of  implementing  the 
measures  outlined  to  reduce  non-performing  loans  and  to  improve  the  business 
environment.  The  adoption  and  implementation  of  several  reform  plans,  including 
fiscal-structural reforms to strengthen the sustainability of public finances, will need to 
be monitored. 

On  30  April  2019,  Portugal  submitted  its  2019  National  Reform  Programme  and  its 
2019  Stability  Programme.  In  order  to  take  account  of  their  interlinkages,  the  two 
programmes have been assessed at the same time. 

Relevant country-specific recommendations have been addressed in the programming 
of  the  European  Structural  and  Investment  Funds  ('ESI  Funds')  for  the  2014-2020 
period.  As  provided  for  in  Article  23  of  Regulation  (EU)  No  1303/2013  of  the 
European  Parliament  and  of  the  Council5,  where  it  is  necessary  to  support  the 
implementation of relevant Council recommendations, the Commission may request a 
Member  State  to  review  and  propose  amendments  to  its  Partnership  Agreement  and 
relevant programmes. The Commission has provided further  details on how it would 

SWD(2019) 1021 final. 
COM(2019) 150 final. 
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). 

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(7) 

(8) 

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make use of that provision in guidelines on the application of the measures linking the 
effectiveness of the ESI Funds to sound economic governance6.  

Portugal  is  currently  in  the  preventive  arm  of  the  Stability  and  Growth  Pact  and 
subject to the transitional debt rule. In its 2019 Stability Programme, Portugal plans to 
attain a headline deficit of 0.2% of GDP in 2019, a surplus of 0.3% of GDP in 2020 
and  a  further  improvement  to  a  surplus  of  0.7%  of  GDP  by  2022.  Those  plans  only 
partially include the potential deficit-increasing impact of bank support measures from 
2020  onwards.  Based  on  the  recalculated  structural  balance,  the  medium-term 
budgetary objective – which has been changed from a structural surplus of 0.25% of 
GDP  in  2019  to  a  balanced  budgetary  position  in  structural  terms  as  of  2020  –  is 
planned  to  be  achieved  in  2020.  The  2019  Stability  Programme  projects  the  general 
government  debt-to-GDP  ratio  to  reach  118.6%  in  2019  and  115.2%  in 2020,  which 
would  then  be  at  103.7%  in  2022.  The  macroeconomic  scenario  underpinning  those 
budgetary projections is plausible for 2019 and 2020 and favourable for the following 
years.  At  the  same  time,  the  measures  needed  to  support  the  planned  deficit  targets 
from 2019 onwards have not been sufficiently specified. 

The 2019 Stability Programme does not provide information on the budgetary impact 
of  the  exceptional  expenditure  in  relation  to  preventive  measures  to  protect  the 
national territory against wildfires, following the large-scale wildfires that occurred in 
2017. However, in a letter dated 9 May 2019, the Portuguese authorities have provided 
adequate  evidence  of  the  scope  and  nature  of  these  additional  budgetary  costs.  In 
particular,  the  letter  indicates  that  the  2018  budget  implementation  comprises 
exceptional  expenditure  amounting  to  about  0.04%  of  GDP  in  relation  to  preventive 
measures to protect the national territory against wildfires. The letter of 9 May 2019 
sets  out  expenditure  related  to  the  emergency  management,  classified  as  one-off 
measures, and expenditure related to prevention. Due to the integrated nature of these 
expenditures  and  due  to  the  direct  link  with  the  large-scale  wildfires  of  2017,  the 
specific  treatment  of  wildfire-prevention  expenditure  could  be  considered  in 
application  of  the  ‘unusual  event  clause’.  According  to  the  Commission,  the  eligible 
additional  expenditure  in  2018  amounts  to  0.04%  of  GDP  for  preventive  measures. 
The provisions set out in Articles 5(1) and 6(3) of Regulation (EC) No 1466/97 cater 
for  this  additional  expenditure,  in  that  the  unprecedented  large-scale  wildfires  are 
considered unusual events, their impact on Portugal's public finances is significant and 
sustainability would not be compromised by allowing for a temporary deviation from 
the  adjustment  path  towards  the  medium-term  budgetary  objective.  Therefore,  the 
required adjustment towards the medium-term budgetary objective for 2018 has been 
reduced to take into account these additional costs. 

On  13  July  2018,  the  Council  recommended  Portugal  to  ensure  that  the  nominal 
growth  rate  of  net  primary  government  expenditure7  does  not  exceed  0.7%  in  2019, 
corresponding  to  an  annual  structural  adjustment  of  0.6%  of  GDP.  Based  on  the 
Commission  2019 spring  forecast,  there is  a risk of  a significant deviation from  that 
recommended adjustment in 2019. 

COM(2014) 494 final. 
Net  primary  government  expenditure  comprises  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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(9) 

In  2020,  Portugal  should  achieve  its  medium-term  budgetary  objective,  taking  into 
account  the  allowance  linked  to  unusual  events  for  which  a  temporary  deviation  is 
granted.  Based  on  the  Commission  2019  spring  forecast,  this  is  consistent  with  a 
maximum  nominal  growth  rate  of  net  primary  government  expenditure  of  1.5%, 
corresponding  to  an  annual  structural  adjustment  of  0.5%  of  GDP.  Based  on  the 
Commission  2019  spring  forecast  under  unchanged  policies,  there  is  a  risk  of  a 
significant  deviation  from  that  requirement  in  2020.  At  the  same  time,  Portugal  is 
forecast  to  comply  with  the  transitional  debt  rule  in  2019,  as  a  result  of  the  allowed 
annual  deviation  of  0.25%,  but  is  prima  facie  not  projected  to  comply  with  the  debt 
rule in 2020. Overall, the Council is of the opinion that the necessary measures should 
be taken as  of 2019 to  comply  with  the provisions of the Stability and  Growth Pact. 
The  use  of  any  windfall  gains  to  further  reduce  the  general  government  debt  ratio 
would be important. 

(10)  Strengthening  Portugal’s  fiscal  sustainability  hinges  on  continued  growth-friendly 
fiscal consolidation, there is, however, scope to improve the quality of public finances 
and to make expenditure more growth-friendly by supporting investment (see below). 
Despite having increased in 2018, public investment has remained very low compared 
with  EU  standards  and  consistently  below  the  government’s  own  targets.  Enforcing 
the commitment control law, implementing the budget framework law in a strict and 
timely  manner  and  continuing  rationalisation  efforts  remain  crucial  to  improving 
expenditure control and making spending more efficient. Recent stand-alone bottom-
up  expenditure  reviews  in  specific  sectors  have  led  to  overall  limited  efficiency 
savings.  To  achieve  higher  efficiency  gains,  expenditure  reviews  should  instead 
become a regular feature of Portugal’s budget  framework. Moreover, deeper reforms 
to  increase  efficiency  and  a  clear  top-down  focus  on  containing  overall  expenditure, 
are  still  needed.  This  should  largely  build  on  a  strategy  for  public  administration 
reform  aimed  at  better  aligning  public  employment  levels  with  the  need  to  deliver 
effective  services,  which  includes  supporting  staff  reallocation  and  retraining,  and 
promoting  individual  performance  and  the  attractiveness  of  the  public  service  for 
highly skilled staff.  

(11)  Portugal’s  public  finances  are  under  continuous  pressure  from  adverse  demographic 
trends, notably the ageing population, with negative consequences, especially for the 
sustainability of the pension and health systems. While the past reforms improved the 
long-term sustainability of the pension system, ongoing special pension increases and 
early  retirement  reforms  have  entailed  further  discretionary  increases  in  pension 
spending  on  top  of  the  underlying  upward  trend  driven  by  ageing.  The  overall 
sustainability  of  the  pension  system  may  be  at  risk  if  there  are  no  adequate 
compensatory  measures.  In  the  health  sector,  cost-effectiveness  continued  to  be 
promoted in  2018, including through an increased reliance on  centralised purchasing 
and  a  greater  use  of  generics  and  biosimilars.  At  the  same  time,  persistently  high 
hospital  arrears  result  from  inadequate  budgetary  planning  and  implementation  and 
weaknesses  in  accounting  control  and  managerial  practices.  Temporary  decreases  in 
hospital arrears in 2018 have essentially resulted from sizeable extraordinary clearance 
measures. A new programme for 2019 aims to structurally address hospital arrears by 
introducing  a  new  governance  model  for  public  hospitals,  in  combination  with  a 
substantial  increase  in  their  annual  budgets.  This  programme’s  ability  to  slow  down 
the accumulation of hospital arrears in the short term and thereby lead to a structural 
reduction  of  their  overall  stock  crucially  hinges  on  its  timely  and  effective 
implementation.  

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(12) 

Increasing  the  net  incomes  of  state-owned  enterprises  and  reducing  their  debt  would 
help  to  make  Portuguese  public  finances  more  sustainable.  The  authorities  are 
planning  the  net  incomes  of  state-owned  enterprises  as  a  whole  to  approach  a  level 
close to balance in 2019, which means a delay compared with earlier announcements 
aiming at a similar outcome already in 2018. Moreover, measures to ensure adherence 
to  initial  activity  plans  and  efforts  to  ensure  more  timely,  transparent  and 
comprehensive  monitoring  were  delayed  and  have  been  slow  in  translating  into 
corrective action where needed. In particular, a sufficient level of ex-ante transparency 
regarding the financing of state-owned enterprises through recapitalisations and loans 
has not been ensured. 

(13)  Despite  the  ongoing  implementation  of  some  measures  to  decrease  labour  market 
segmentation, such as  the reinforcement of the labour inspectorate and the launch of 
an integration programme for precarious workers in the public service, the proportion 
of  temporary  workers  in  Portugal  still  exceeds  the  EU  average.  More  specific 
measures  agreed  between  the  government,  employers  and  employees  representatives 
aimed  at  further  reducing  labour  market  segmentation  and  precariousness  and 
promoting collective bargaining are still to be approved by Parliament and materialise 
into concrete legislation. 

(14) 

Improved labour market conditions have resulted in fewer people at risk of poverty or 
social  exclusion.  Despite  this  improvement,  income  inequality  remains  high  and  the 
impact of social transfers on poverty reduction is limited. While income inequality in 
Portugal  is  decreasing,  it  still  remains  significantly  higher  than  the  EU  average.  The 
adequacy  of  the  minimum  income  scheme  is  among  the  lowest  in  the  EU  providing 
incomes  of  only  40%  of  the  national  poverty  threshold.  Unless  reviewed,  the  low 
effectiveness of social transfers could be severely tested in case of a future economic 
slowdown with the vulnerable people particularly affected. 

(15)  The  low  qualification  level  of  workers  is  an  obstacle  to  investment  and  productivity 
growth.  About  50%  of  the  population  aged  25-64  has  low  educational  attainment 
levels, well above the Union average of 22% in 2018. The low availability of skilled 
staff is an important obstacle to investment that companies report. For adult learning in 
particular,  there  is  scope  to  further  engage  the  low  qualified  (whose  participation  in 
learning is below the Union average) and to extend targeted public incentives to small 
and  medium-sized  enterprises  to  train  their  staff.  Digital  skills  are  a  particular 
challenge, with 50% of the Portuguese population lacking basic digital skills compared 
to  a  Union  average  of  43%.  Investment  in  education  and  training,  including 
infrastructure, is key to improving employability and social mobility. 

(16)  Measures to increase enrolment in higher education, such as a significant increase in 
scholarships, are ongoing as part of efforts to increase the number of higher education 
graduates.  Among  30-34  year  olds  in  Portugal,  33.5%  have  completed  higher 
education, which is still below the EU average of 40.7%. The persistency of these low 
shares, in particular for graduates in information and communication technologies, the 
natural  sciences,  mathematics  and  statistics  may  have  negative  consequences  for 
Portugal’s  productivity  growth  and  capacity  to  innovate.  While  the  government  is 
trying to address the issue by increasing the number of study places in these fields and 
implementing a review of the higher education system, more efforts are needed. 

(17)  The  ratio  of  non-performing  loans  in  the  financial  system  remains  relatively  high  at 
11.3%. Nevertheless, most banks made substantial  progress  in  meeting the targets  to 
reduce  non-performing  loans.  The  secondary  market  for  distressed  assets  gained 

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momentum while banks also accelerated write-offs and non-performing credits cures. 
The breakdown of non-performing loans  continues  to  show a steady high proportion 
(65%) of corporate non-performing loans. Over the past few years, the authorities have 
implemented  a  number  of  legal  and  institutional  reforms  for  insolvency  and  debt 
enforcement.  However,  the  average  length  of  insolvency  proceedings  remains 
persistently  high  as  does  the  number  of  pending  court  cases.  The  legal  and  judicial 
frameworks are heavily affecting the recovery process and the prospects for efficient 
repossession of collateral. The long average duration of recovery proceedings weighs 
on the prices applied by the market to non-performing assets. 

(18)  Reforms aimed at administrative simplification have been largely absent, as efforts in 
this area are mostly limited to across-the-board implementation of dematerialisation of 
procedures  and  the  once-only  principle.  Priority  should  be  given  in  particular  to 
limiting  the  number  of  documents  that  have  to  be  submitted  and  either  replacing 
authorisation  schemes  with  simple  declarations  of  compliance  with  applicable 
conditions  or,  for  the  more  sensitive  sectors,  simplifying  authorisations  by  reducing 
decision times and adopting tacit approval. The streamlining of procedures for specific 
sectors is still lacking. Excessive administrative charges remain in place, notably in the 
construction  sector.  Additionally,  shortcomings  in  planning  and  monitoring  public 
procurement  hinder  competition.  The  performance  of  public  procurement  could  be 
improved  by  introducing  structured  and  quantified  planning  and  ensuring  closer 
supervision  of  the  execution  phase  of  contracts.  Despite  a  significant  reduction  in 
direct awards between 2017 and 2018, their use remains high. 

(19) 

In the  context  of the financial  assistance programme, Portugal has made an  effort to 
reduce  the  regulatory  burden  for  highly  regulated  professions,  notably  with  the 
introduction  of  the  2013  framework  law.  In  some  cases,  however,  this  progress  was 
halted or even reversed with the adoption of bylaws for the individual professions and 
the  introduction  of  a  ban  on  corporate  groups.  Regulatory  and  administrative 
restrictions  on  business  and  professional  services  prevail,  raising  concerns  about 
competition,  price  levels,  innovation  and  the  quality  of  services.  So  far,  no  reform 
plans  have  been  announced  in  response  to  the  Commission’s  recommendations  on 
regulation  of  professional  services8,  or  in  response  to  the  2018  OECD  Competition 
Assessment Review on Portugal’s self-regulated professions (in cooperation with the 
Portuguese Competition Authority). 

(20)  The conditions for firms to access finance have been improving over the last few years 
and  the  proportion  of  firms  reporting  access  to  finance  as  main  constraint  to 
investment  is  now in  line  with  the  EU  average.  The  Portuguese  authorities  launched 
and strengthened several initiatives in this area, such as the Capitalizar programme and 
other  programmes  targeting  specific  types  of  companies  or  sectors.  However, 
Portuguese firms still heavily rely on their own resources to finance investment, and a 
significant amount of bank loans ends up in firms with very low productivity. The low 
level  of  capital  invested  per  worker  represents  a  major  obstacle  to  upgrade  the 
productive  structure  of  the  Portuguese  economy.  In  this  context,  it  is  important  that 
productive  investment  increases  while  being  gradually  rechannelled  towards  firms 
with  growth  potential  and  in  sectors  with  high  productivity  profiles.  Although  other 
sources of financing, such as venture and equity capital, have been increasing over the 
last few years, they remain markedly lower than the EU average. 

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SWD(2016) 436 final. 

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(21)  The justice system is becoming more efficient but continues to face critical challenges 
with  lengthy  proceedings  and  a  high  backlog  of  cases,  in  particular  in  the 
administrative  and  tax  courts.  While  efforts  to  crack  down  on  corruption  continue, 
preventing corruption remains an issue due to  the lack of a coordinated  strategy and 
fragmented responsibilities.  

(22) 

(23) 

(24) 

Investment  in  research  and  development  has  recently  picked  up  again  but  remains 
insufficient to upgrade the Portuguese national research and innovation system. After 
years  of  decline,  the  share  of  spending  on  research  and  development  in  relation  to 
GDP  increased  recently  and  in  2017,  business  research  and  development  intensity 
slightly  surpassed  the  public  research  and  development  intensity.  Little  progress  has 
been made to upgrade Portugal’s economic structure to higher shares of value-added 
in  high-tech  manufacturing  and 
in  knowledge-intensive  services.  Promoting 
investment  in  intangible  assets,  including  research  and  development  but  also 
managerial skills, financial literacy and digital skills to enable firms to grow, increase 
their innovation capacity and enter export markets offers Portugal significant potential 
to boost investment and productivity growth. 

Insufficient  maritime  and  railway  connections  make  it  difficult  for  export-oriented 
businesses  to  fully  benefit  from  the  potential  of  the  single  market.  Due  to  its 
geographical  location,  Portugal  is  a  natural  maritime  entry  point,  especially  for  the 
transatlantic routes. Timely investments in the new container terminals in Sines and in 
Barreiro  (Terminal  Vasco  da  Gama)  and  finalisation  of  the  ongoing  investment 
projects  in  the  other  main  Portuguese  ports  (Viana  do  Castelo,  Leixoes,  Aveiro, 
Figueira  da  Foz,  Setubal)  would  increase  the  container  handling  capacity  of  these 
ports. Railways are still widely underused in the connections to Spain (both East-West 
and North-South corridors). Developing a comprehensive Iberian plan, which includes 
identifying the intermediate steps, terminals, interconnections needed to  benefit from 
the  Spanish  network  upgrade  and  developing  the  International  Union  of  Railways 
gauge, would help boost Portugal’s international rail performance. 

Investments in resource efficiency and climate adaptation would help to achieve long-
term  sustainable  growth.  Anticipating  the  adverse  effects  of  climate  change,  such  as 
floods and forest fires, remains a challenge in Portugal. Challenges remain to achieve 
the  2020  energy  efficiency  target,  and  the  latest  data  for  2017  show  that  energy 
consumption is increasing. There is still a wide margin to improve energy efficiency in 
buildings  and  reduce  energy  consumption  in  business.  Better  energy  connectivity  of 
the Iberian Peninsula could enable more competition and facilitate the deployment of 
renewable energy. 

(25)  The programming of EU funds for the period 2021-2027 could help address some of 
the  gaps  identified  in  the  recommendations,  in  particular  in  the  areas  covered  by 
Annex  D  to  the  country  report9.  This  would  allow  Portugal  to  make  the  best  use  of 
those funds in respect of the identified sectors, taking into account regional disparities 
and  the  special  situation  of  the  outermost  regions.  Strengthening  the  country’s 
administrative capacity for the management  of these funds is  an important  factor for 
the success of this investment. 

(26) 

In  the  context  of  the  2019  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Portugal’s  economic  policy  and  published  it  in  the  2019 
country  report.  It  has  also  assessed  the  2019  Stability  Programme  and  the  2019 
National  Reform  Programme  and  the  follow-up  given  to  the  recommendations 

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SWD(2019) 1021 final. 

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(28) 

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 Union rules and guidance, given the need to strengthen the Union’s 
overall  economic  governance  by  providing  Union-level  input  into  future  national 
decisions.  

In  the  light  of  this  assessment,  the  Council  has  examined  the  2019  Stability 
Programme and its opinion10 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  2019  National  Reform  Programme  and  the  2019  Stability  Programme. 
Its recommendations under Article  6 of Regulation (EU) No 1176/2011  are reflected 
in  recommendations  (1)  to  (4)  below.  Those  recommendations  also  contribute  to  the 
implementation  of  the  Recommendation  for  the  euro  area,  in  particular  the  first, 
second  and  fourth  euro  area  recommendations.  Fiscal  policies  referred  to  in 
recommendation  (1)  contribute  inter-alia  to  address  imbalances  linked  to  high 
government debt. 

HEREBY RECOMMENDS that Portugal take action in 2019 and 2020 to: 

1. 

2. 

3. 

4. 

Achieve  the  medium-term  budgetary  objective  in  2020,  taking  into  account  the 
allowance linked to unusual events for which a temporary deviation is granted. Use 
windfall  gains  to  accelerate  the  reduction  of  the  general  government  debt  ratio. 
Improve  the  quality  of  public  finances  by  prioritising  growth-enhancing  spending 
while  strengthening  overall  expenditure  control,  cost  efficiency  and  adequate 
budgeting,  with  a  focus  in  particular  on  a  durable  reduction  of  arrears  in  hospitals. 
Improve the financial sustainability of state-owned enterprises, while ensuring more 
timely, transparent and comprehensive monitoring.  

Adopt measures to  address  labour market  segmentation.  Improve the skills  level  of 
the population, in particular their digital literacy, including by making adult learning 
more  relevant  to  the  needs  of  the  labour  market.  Increase  the  number  of  higher 
education graduates, particularly in science and information technology. Improve the 
effectiveness and adequacy of the social safety net. 

Focus  investment-related  economic  policy  on  research  and  innovation,  railway 
transport  and  port  infrastructure,  low  carbon  and  energy  transition  and  extending 
energy interconnections, taking into account regional disparities. 

Allow  for  a  swifter  recovery  of  the  collateral  tied  to  non-performing  loans  by 
increasing  the  efficiency  of  insolvency  and  recovery  proceedings.  Reduce  the 
administrative  and  regulatory  burden  on  businesses,  mainly  by  reducing  sector-
specific  barriers  to  licensing.  Develop  a  roadmap  to  reduce  restrictions  in  highly 
regulated  professions.  Increase  the  efficiency  of  administrative  and  tax  courts,  in 
particular by decreasing the length of proceedings.  

Done at Brussels, 

For the Council 
The President 

10 

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

EN 

8 

  EN