Recommendation for a COUNCIL RECOMMENDATION on the 2020 National Reform Programme of Portugal and delivering a Council opinion on the 2020 Stability Programme of Portugal
Date: 2020-05-20
Institutions: European Commission, Secretariat-General
Subjects: Portugal, economic policy, economic recovery, employment policy, epidemic, health policy, infectious disease, investment, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 20.5.2020  COM(2020) 522 final  Recommendation for a COUNCIL RECOMMENDATION on the 2020 National Reform Programme of Portugal and delivering a Council opinion on the 2020 Stability Programme of Portugal  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2020 National Reform Programme of Portugal and delivering a Council opinion 
on the 2020 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) 

(2) 

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On  17  December  2019,  the  Commission  adopted  the  Annual  Sustainable  Growth 
Strategy,  marking  the  start  of  the  2020  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. 
On  17  December  2019,  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. 
The 2020 country report for Portugal3 was published on 26 February 2020. It assessed 
Portugal’s  progress  in  addressing  the  country-specific  recommendations  adopted  by 

OJ L 209, 2.8.1997, p. 1. 
OJ L 306, 23.11.2011, p. 25. 
SWD(2020) 521 final. 

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(3) 

(4) 

(5) 

the Council on 9 July 20194, 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 26 February 2020. 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 (NPL) constitute vulnerabilities in a context of low 
productivity growth. 

On 11 March 2020, the World Health Organization officially declared the COVID-19 
outbreak  a  global  pandemic.  It  is  a  severe  public  health  emergency  for  citizens, 
societies  and  economies.  It  is  putting  national  health  systems  under  severe  strain, 
disrupting  global  supply  chains,  causing  volatility  in  financial  markets,  triggering 
consumer  demand  shocks  and  having  negative  effects  across  various  sectors.  It  is 
threatening  people’s  jobs,  their  incomes  and  companies’  business.  It  has  delivered  a 
major  economic  shock  that  is  already  having  serious  repercussions  in  the  European 
Union. On 13 March 2020, the Commission adopted a Communication5 calling for a 
coordinated economic response to the crisis, involving all actors at national and Union 
level. 

Several Member  States have declared a state of emergency or introduced emergency 
measures.  Any  emergency  measures  should  be  strictly  proportionate,  necessary, 
limited in time, and in line with European and international standards. They should be 
subject to democratic oversight and independent judicial review. 

On  20  March  2020,  the  Commission  adopted  a  Communication  on  the  activation  of 
the general escape clause of the Stability and Growth Pact6. The clause, as set out in 
Articles 5(1), 6(3), 9(1) and 10(3) of Regulation (EC) 1466/97 and Articles 3(5) and 
5(2) of Regulation (EC) 1467/97, facilitates the coordination of budgetary policies in 
times  of  severe  economic  downturn.  In  its  Communication,  the  Commission  shared 
with the Council its view that, given the expected severe economic downturn resulting 
from the COVID-19 outbreak, the current  conditions  permit activation of the clause. 
On  23  March  2020,  the  Ministers  of  Finance  of  the  Member  States  agreed  with  the 
assessment of the Commission. The activation of the general escape clause allows for 
a temporary departure from the adjustment path towards the medium-term budgetary 
objective,  provided  that  this  does  not  endanger  fiscal  sustainability  in  the  medium 
term. For the corrective arm, the Council may also decide, on a recommendation from 
the  Commission,  to  adopt  a  revised  fiscal trajectory.  The  general escape  clause  does 
not suspend the procedures of the Stability and Growth Pact. It allows Member States 
to depart from the budgetary requirements that would normally apply while enabling 
the  Commission  and  the  Council  to  undertake  the  necessary  policy  coordination 
measures within the framework of the Pact. 

(6) 

Continued  action  is  required  to  limit  and  control  the  spread  of  the  pandemic, 
strengthen  the  resilience  of  the  national  health  systems,  mitigate  the  socio-economic 
consequences through supportive measures for business and households and to ensure 
adequate  health  and  safety  conditions  at  the  workplace  with  a  view  to  resuming 
economic  activity.  The  Union  should  fully  use  the  various  tools  at  its  disposal  to 
support  Member  States’  efforts  in  those  areas.  In  parallel,  Member  States  and  the 

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OJ C 301, 5.9.2019, p. 117. 
COM(2020) 112 final. 
COM(2020) 123 final. 

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(8) 

(9) 

Union should work together to prepare the measures necessary to get back to a normal 
functioning of our societies and economies and to sustainable growth, integrating inter 
alia the  green  transition and  the  digital  transformation,  and  drawing  all  lessons  from 
the crisis. 

The  COVID-19  crisis  has  highlighted  the  flexibility  that  the  single  market  offers  to 
adapt  to  extraordinary  situations.  However,  in  order  to  ensure  a  swift  and  smooth 
transition to the recovery phase and the free movement of goods, services and workers, 
exceptional measures  that  prevent  the  single  market  from  functioning  normally  must 
be removed as soon as they are no longer indispensable. The current crisis has shown 
the need for crisis preparedness plans in the health sector, which include in particular 
improved  purchasing  strategies,  diversified  supply  chains  and  strategic  reserves  of 
essential  supplies.  They  are  key  elements  for  developing  broader  crisis  preparedness 
plans. 
The  Union  legislator  has  already  amended  the  relevant  legislative  frameworks7  to 
allow  Member  States  to  mobilise  all  unused  resources  from  the  European  Structural 
and  Investment  Funds  so  they  can  address  the  exceptional  effects  of  the  COVID-19 
pandemic. Those amendments will provide additional flexibility, as well as simplified 
and streamlined procedures. To alleviate cash flow pressures, Member States can also 
benefit  from  a  100%  co-financing  rate  from  the  Union  budget  in  the  2020-2021 
accounting year. Portugal is encouraged to make full use of those possibilities to help 
the individuals and sectors most affected by the challenges. 

The  socio-economic  consequences  of  the  pandemic  are  likely  to  be  unevenly 
distributed  across  Portuguese  regions  due  to  different  specialisation  patterns,  in 
particular in regions markedly relying on tourism, such as Algarve and the outermost 
regions of Madeira and the Azores. This entails a substantial risk of widening regional 
and  territorial  disparities  within  Portugal.  Combined  with  the  risk  of  a  temporary 
unravelling of the convergence process between Member States, the current situation 
calls for targeted policy responses. 

(10)  On  16  May  2020,  Portugal  submitted  its  2020  National  Reform  Programme  and  its 
2020  Stability  Programme.  In  order  to  take  account  of  their  interlinkages,  the  two 
programmes have been assessed at the same time. 

(11)  Portugal  is  currently  in  the  preventive  arm  of  the  Stability  and  Growth  Pact  and 
subject to the debt rule. On 13 July 2018, the Council recommended Portugal to ensure 
that the nominal growth rate of net primary government expenditure8 does not exceed 
0,7% in 2019, corresponding to an annual structural adjustment of 0,6% of GDP. The 

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Regulation (EU) 2020/460 of the European Parliament and of the Council of 30 March 2020 amending 
Regulations  (EU)  No  1301/2013,  (EU)  No  1303/2013  and  (EU)  No  508/2014  as  regards  specific  measures  to 
mobilise  investments  in  the  healthcare  systems  of  Member  States  and  in  other  sectors  of  their  economies  in 
response to the COVID-19 outbreak (Coronavirus Response Investment Initiative) (OJ L 99, 31.3.2020, p. 5) and 
Regulation  (EU)  2020/558  of  the  European  Parliament  and  of  the  Council  of  23  April  2020  amending 
Regulations  (EU)  No  1301/2013  and  (EU)  No  1303/2013  as  regards  specific  measures  to  provide  exceptional 
flexibility for the use of the European Structural and Investments Funds in response to the COVID-19 outbreak 
(OJ L 130, 24.4.2020, p. 1). 
8 
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 four-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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(13) 

Commission’s  overall  assessment  confirms  a  significant  deviation  from 
the 
recommended adjustment path towards the medium-term budgetary objective in 2019, 
and  over  2018  and  2019  taken  together.  However,  in  light  of  the  activation  of  the 
general  escape  clause,  further  steps  under  the  significant  deviation  procedure  for 
Portugal are not warranted. 

In  its  2020  Stability  Programme,  the  government  did  not  include  a  macroeconomic 
scenario  and  plans  for  the  general  government  balance  and  debt-to-GDP  ratio  for  at 
least 2020. The 2020 Stability Programme estimates, however, that every 30 working 
days – i.e. around 1,5 full months – of confinement may, on average, trigger a negative 
impact  on  annual  GDP  of  6,5  percentage  points.  The  macroeconomic  and  fiscal 
outlook  is  affected  by  high  uncertainty  due  to  the  COVID-19  pandemic.  There  are 
country-specific  risks  underlying  the  budgetary  projections,  linked  to  the  surge  in 
public contingent liabilities stemming from some public corporations and the COVID-
19-related measures targeting the private sector. This is on top of non-negligible pre-
existing levels, partly related to potential further budgetary impacts of additional bank 
support measures. 

In response to the COVID-19 pandemic, and as part of a coordinated Union approach, 
Portugal has adopted budgetary measures to increase the capacity of its health system, 
contain  the  pandemic,  and  provide  relief  to  those  individuals  and  sectors  that  have 
been  particularly  affected.  The  2020  Stability  Programme  reports  estimates  for  the 
budgetary  impacts  of  those  measures  on  a  either  monthly  or  annual  basis,  without 
providing a projected annual aggregate figure for 2020.  The measures include, among 
others,  a  one-time  special  support  for  firms  for  the  resumption  of  business  activity 
(EUR 508,0  million  or  0,3%  of  GDP),  a  simplified  scheme  for  the  temporary 
interruption  of  work  (“lay-off”,  EUR 373,3  million  or  0,2%  of  GDP  per  month  of 
application), and the purchase of personal protective equipment by the health system 
(0,1% of GDP per month of application).9 The Commission estimates that an overall 
direct budgetary cost of around 2,5% of GDP may result from those measures in 2020. 
In addition, Portugal has announced measures that, while not having as a rule a direct 
budgetary  impact,  will  contribute  to  support  liquidity  to  businesses  and  households, 
which the 2020 Stability Programme estimates at close to EUR 25,2 billion or 12,5% 
of GDP. Those measures include tax deferrals for value-added, personal and corporate 
income  taxes,  as  well  as social  contributions (EUR 7,9 billion or  3,9% of GDP) and 
also  State  guaranteed  credit  lines  and  other  similar  initiatives  (  EUR  4,0  billion  or 
2,0% of GDP). Overall, the measures taken by Portugal are in line with the guidelines 
set out in the Commission Communication on a coordinated economic response to the 
COVID-19  outbreak.  The  full  implementation  of  those  measures,  followed  by  a 
refocusing  of  fiscal  policies towards  achieving  prudent  medium-term  fiscal  positions 
when economic conditions allow, will contribute to preserving fiscal sustainability in 
the medium term. 

(14)  Based on the Commission 2020 spring forecast under unchanged policies, Portugal’s 
general government deficit is forecast at 6,5% of GDP in 2020 and 1,8% in 2021. The 
general government debt-to-GDP ratio is projected to peak at 131,6% in 2020, before 
decreasing to 124,4% in 2021. 

9 
2020 spring forecast. 

The  budgetary  impacts  are  expressed  as  a  percentage  of  GDP  in  2020  according  to  the  Commission 

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(15)  On 20 May 2020, the Commission issued a report prepared in accordance with Article 
126(3) of the Treaty for Portugal due to the projected breach of the 3% of GDP deficit 
threshold in 2020. Overall, the analysis suggests that the deficit criterion as defined in 
the Treaty and in Regulation (EC) No 1467/1997 is not fulfilled.  

(16)  The COVID-19 pandemic hit Portugal in early March 2020, putting its health system 
under  great  pressure.  The  government  swiftly  implemented  a  broad  range  of  strict 
containment measures, having enacted a constitutional state of emergency between 18 
March 2020 and 2 May 2020 to limit as much as possible the spread of the disease and 
the  loss  of  lives.  Portugal  took  measures  to  strengthen  the  response  capacity  of  the 
health system and to flatten the curve of infections, so as not to overwhelm hospitals. 
The  national  and  global  containment  measures  have  severely  curtailed  economic 
activity  in  most  sectors,  hitting  tourism  and  related  activities  particularly  hard,  and 
clouded the social and economic outlook in Portugal, particularly its micro, small and 
medium-sized  enterprises  (SMEs).  The  economy  is  projected  to  contract  by  6,8%  in 
2020 and to rebound by 5,8% in 2021.  

(17)  To  mitigate  the  immediate  impact  of  the  COVID-19  pandemic  on  people’s  health, 
high expenditure for the health system is being incurred on a broad front. Investments 
are  needed  to  improve  the  resilience  of  the  health  system,  securing  equipment, 
products  and  infrastructure  necessary  to  bolster  crisis  response  capacities,  including 
intensive  care,  testing,  technological  and  applied  medical  research,  and  universal 
access, including outside urban areas and in the outermost regions of Madeira and the 
Azores.  At  the  outset  of  the  COVID-19  outbreak,  a  plan  to  introduce  a  new 
governance  model  for  public  hospitals  was  gradually  under  way,  with  substantial 
increases  in  annual  budgets.  Its  steady  implementation  in  the  current  juncture  could 
help to strengthen the resilience of the health system. COVID-19 has demonstrated the 
fragility  of  long-term  care  facilities  in  Portugal,  which  have  seen  higher  rates  of 
infection and lethality. Despite improvements in the territorial coverage of long-term 
care in the last decade, overall access rates are low in all regions of the country. At the 
same  time,  before  the  COVID-19  outbreak,  long-term  healthcare  expenditure  was 
forecast to have one of the largest increases in the Union as percentage share of GDP. 
Continued efforts to improve efficiency and capacity of health and long-term care are 
necessary  to  deal  with  the  current  crisis  as  well  as  to  address  ageing-related 
challenges.  

(18)  Following  sustained  positive  labour  market  developments  since  2014,  Portugal  will 
now face extraordinary employment challenges as a result of the pandemic. According 
to  the  Commission  forecast,  unemployment  is  expected  to  rise  to  9,7%  of  the  active 
population  in  2020  and  recover  to  7,4%  in  2021,  up  from  6,5%  in  2019.  To  support 
employment  and  mitigate  the  risk  of  job  losses,  Portugal  has  simplified  and  adapted 
the use of its existing scheme for the temporary interruption of work. Targeted use of 
Union’s and national programmes could preserve jobs and economic activity, notably 
among  small  and  medium-sized  enterprises  (SMEs).  In  the  recovery  phase, 
personalised  and  targeted  active  labour  market  policies,  in  particular  upskilling  and 
reskilling,  will  play  a  decisive  role  in  keeping  the  workforce  job-ready.  Cooperation 
among employers, education and training institutions, and public employment services 
will be crucial to generating a recruitment surge. 

(19)  The outbreak of COVID-19 requires measures to mitigate social impacts and protect 
people in vulnerable situations, so that inequalities are not exacerbated. These include 
unemployment  benefit  schemes  and  income  support  for  the  most  affected  workers, 
including  self-employed  and  nonstandard  workers,  access  to  services  and  measures 

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fostering  reintegration  in  the  labour  market.  The  implementation  of  a  national  social 
contingency plan in cooperation with social partners and civil society could contribute 
to an immediate and coordinated response to mitigate the social consequences of the 
crisis. Policy changes to reverse the decline in the effectiveness of social transfers in 
recent years, e.g. increases in the minimum income, the solidarity supplement for the 
elderly, pensions and family benefits have had a positive effect on income distribution. 
Nevertheless,  social  transfers  (excluding  pensions)  reduced  the  proportion  of 
population at risk of poverty by only 23,8% in Portugal in 2018, significantly below 
the EU average of 34%. In addition, the adequacy of the minimum income scheme is 
among the lowest in the Union, providing incomes of only 40% of the national poverty 
threshold.  

(20)  The COVID-19 pandemic poses significant demands on the use of digital technologies 
to  ensure  the  continued  access  to  education  and  business  activity,  against  the 
background  of  the  necessary  adoption  of  social  distancing  measures.  Portuguese 
schools  and  training  centres  have  closed  and  traditional,  in-person  learning  has  been 
disrupted. Around 6% of households still have no access to the internet, affecting an 
estimated  50,000  pupils,  and  internet  access  and  telecommunications  network 
coverage  vary  widely  between  urban  and  rural  areas.  Students  from  socio-
economically advantaged families are better placed to manage the challenges posed by 
distance learning. In addition, Portugal has a large digital skills deficit. In 2019, 48% 
of the population lacked basic digital skills, including about 26% with no digital skills 
at  all  and  the  proportion  of  those  having  never  used  the  internet  is  twice  the  EU 
average. Current circumstances call for intensive implementation of e-training courses 
and efforts to help people suffering from digital exclusion to overcome the obstacles in 
accessing distance learning. The adoption of digital technologies by businesses to offer 
alternative working arrangements and digital services would allow business continuity 
to  firms  whose  services  can  be  provided  online,  hence  mitigating  the  impact  of  the 
restrictions in some sectors. This is particularly relevant in Portugal whose economy is 
mostly  characterized  by  micro-enterprises  concentrated  in  traditional  sectors.  One  of 
the  main  factors  hindering  the  digitalisation  of  SMEs  is  the  digital  knowledge  gap, 
which  originates  by  overall  low  levels  of  digital  literacy  among  managers  and 
employees. 

(21)  To  prevent  avoidable  bankruptcies  and  allow  firms  to  survive  the  shock  and  remain 
competitive, Portugal adopted a set of measures aimed at supporting viable firms, and 
in  particular  SMEs,  which  have  been  affected  by  the  imposition  of  the  social 
distancing  measures,  implying  restrictions  to  operations  and  a  drop  in  domestic  and 
global demand.  These measures focus on provision of the liquidity support, including 
through guarantees funded by the state and financial institutions, direct subsidies, tax 
deferrals and reduction of social contributions. They focus in particular on the hardest 
hit  sectors, including  tourism,  hospitality,  and  related  economic  activities,  as  well  as 
manufacturing and exporting companies. It is important that such measures are timely 
and  efficiently  implemented  by  the  public  institutions  and  private  intermediaries.  In 
this  context,  the  Portuguese  government  streamlined  the  process  to  access  the  credit 
lines, namely the documentation to be presented by firms.  In the process of designing 
and  implementing  these  measures,  the  resilience  of  the  banking  sector  needs  to  be 
taken  into  account. Additional policy action aims at supporting entrepreneurship and 
the self-employed.  

(22)  To  foster  the  economic  recovery,  it  will  be  important  to  front-load  mature  public 
investment  projects  and  promote  private  investment,  including  through  relevant 

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it 

towards 

investments 

to  support  research  and 

reforms.  Growth  enhancing 
innovation, 
digitalisation, connectivity and green transition will contribute to the recovery  of the 
Portuguese  economy  and  redirect 
long-term  sustainable  growth. 
Investments  in  transport  infrastructure  could  address  the  peripheral  situation  of 
Portugal, in particular by closing railway connection gaps with Spain and by allowing 
the  exploitation  of  the  underused  potential  of  Portuguese  ports.  Portugal’s  National 
Energy and Climate Plan reports important investment needs to tackle the climate and 
energy  transition.  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.  Investment  can  also  support  anticipating  the  adverse  effects  of 
climate change, such as floods and forest fires, as well as improving water and waste 
management and developing the potential of the circular economy. The programming 
of  the  Just  Transition  Fund  for  the  period  2021-2027  could  help  Portugal  to  address 
some  of  the  challenges  posed  by  the  transition  to  a  climate  neutral  economy,  in 
particular  in  the  territories  covered  by  Annex  D  to  the  country  report10.  This  would 
allow Portugal to make the best use of that fund.  

(23)  The Portuguese justice system has become more efficient in recent years, thanks to a 
number  of  measures  that  continue  to  be  implemented.  However,  the  pandemic  and 
resulting  recession  may  lead  to  an  increase  in  litigation  that  could  exacerbate 
remaining bottlenecks, in particular the lengthy proceedings and high case backlogs in 
administrative and tax courts. Increased efficiency and resilience of the justice system 
could  improve  business  environment,  particularly  benefiting  domestic  SMEs  and 
investors.  

to  address  medium- 

(24)  While the present recommendations focus on tackling the socio-economic impacts of 
the  pandemic  and  facilitating  the  economic  recovery,  the  2019  country-specific 
recommendations adopted by the Council on 9 July 2019 also covered reforms that are 
essential 
structural  challenges.  Those 
recommendations remain pertinent and will continue to be monitored throughout next 
year’s  European  Semester  annual  cycle.  That  also  applies  to  recommendations 
regarding investment-related economic policies. The latter recommendations should be 
taken  into  account  for  the  strategic  programming  of  cohesion  policy  funding  post-
2020, including for mitigating measures and exit strategies with regard to the current 
crisis. 

long-term 

to 

(25)  Past  years  witnessed  several  aggregate  improvements  in  the  Portuguese  banking 
system.  Profitability  metrics  improved  on  the  back  of  efforts  to  increase  the  sector’s 
efficiency  and  the  reduction  of  provisions  and  impairments.  Given  the  improved 
profitability, the banking system proceeded on its path to strengthen capital ratios. Yet, 
own  funds  levels  are  still  below  EU  average.  The  ratio  of  NPLs  continued  its 
multiyear  downward  trend  but  remains  double  the  EU  ratio.  Income  generation 
capacity remains a challenge amidst low interest rates and in an economy with a still 
high indebtedness level. More recently, the weakening economy, the COVID-19 crisis 
and the low interest rate environment will create challenges for the banking sector and 
will be reflected in the credit quality of loans granted. Furthermore, Portuguese banks 
remain  exposed  to  some  geographies  highly  dependent  to  commodity  price 
developments,  namely  oil.  The  exposure  to  these  geographies  is  sensitive  to  market 

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SWD(2020) 251 final. 

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risk,  foreign  exchange  and  credit  risk,  and  may  impact  the  credit  quality  of  loans 
granted to firms exposed to these geographies. 

(26)  Lengthy  insolvency  proceedings  have  been  identified  as  one  of  the  key  factors 
preventing  banks  from  dealing  promptly  with  the  existing  stock  of  NPLs.  They  also 
have a substantial influence on the pricing of these assets on the secondary market, as 
the outcomes, measured as payments to creditors, are insufficient. The breakdown of 
NPLs continues to show a consistently high proportion of corporate loans (about two 
thirds),  which  are  least  amenable  to  a  swift,  standardised  approach.  In  recent  years, 
several  amendments  have  been  made  to  both  insolvency  and  the  civil  enforcement 
proceedings. Further adjustments, in particular targeting unjustified delay, would help 
for both creditors and borrowers, with the latter benefiting from a fresh start.  

(27)  The  European  Semester  provides  the  framework  for  continuous  economic  and 
employment  policy  coordination  in  the  Union,  which  can  contribute  to  a  sustainable 
economy.  Member  States  have  taken  stock  of  progress  regarding United  Nations’ 
Sustainable  Development  Goals  (SDGs)  implementation  in  their  2020  National 
Reform  Programmes.  By  ensuring  the  full  implementation  of  the  recommendations 
below, Portugal will contribute to the progress towards the SDGs and to the common 
effort of ensuring competitive sustainability in the Union. 

(28)  Close coordination between economies in the economic and monetary union is key to 
achieve  a  swift  recovery  from  the  economic  impact  of  the  COVID-19.  Portugal 
should,  as  a  Member  State  whose  currency  is  the  euro  –  and  taking  into  account 
political  guidance  by  the  Eurogroup  –  ensure  its  policies  remain  consistent  with  the 
euro area recommendations and coordinated with those of the other euro area Member 
States. 

(29) 

(30) 

(31) 

In  the  context  of  the  2020  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Portugal’s  economic  policy  and  published  it  in  the  2020 
country  report.  It  has  also  assessed  the  2020  Stability  Programme  and  the  2020 
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 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  that  assessment,  the  Council  has  examined  the  2020  Stability 
Programme and its opinion11 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  2020  National  Reform  Programme  and  the  2020  Stability  Programme. 
The present recommendations take into account the need to tackle the pandemic and 
facilitate  the  economic  recovery  as  a  first  necessary  step  to  permit  an  adjustment  of 
imbalances.  Recommendations  directly  addressing  the  macroeconomic  imbalances 
identified  by  the  Commission  under  Article  6 of  Regulation  (EU)  No 1176/2011  are 
reflected in recommendations (1), (2), (3) and (4), 

HEREBY RECOMMENDS that Portugal take action in 2020 and 2021 to: 

1. 

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In  line  with  the  general  escape  clause,  take  all  necessary  measures  to  effectively 
address the pandemic, sustain the economy and support the ensuing recovery. When 

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

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2. 

3. 

economic  conditions  allow,  pursue  fiscal  policies aimed  at  achieving  prudent 
medium-term  fiscal  positions  and  ensuring  debt  sustainability, while  enhancing 
investment. Strengthen the resilience of the health system and ensure equal access to 
quality health and long-term care.  

Support  employment  and  prioritise  measures  to  preserve  jobs.  Guarantee  sufficient 
and  effective  social  protection  and  income  support.  Support  the  use  of  digital 
technologies  to  ensure  equal  access  to  quality  education  and  training  and  to  boost 
firms’ competitiveness. 

Implement the temporary measures aimed at securing access to liquidity for firms, in 
particular small and medium-sized enterprises. Front-load mature public investment 
projects  and  promote  private  investment  to  foster  the  economic  recovery.  Focus 
investment  on  the  green  and  digital  transition,  in  particular  on  clean  and  efficient 
production and use of energy, rail infrastructure and innovation.  

4. 

Increase the efficiency of administrative and tax courts. 

Done at Brussels, 

For the Council 
The President 

EN 

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