HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN"L 295/14
EN
Official Journal of the European Union
25.10.2012
DECISIONS
COUNCIL IMPLEMENTING DECISION
of 9 October 2012
amending Implementing Decision 2011/344/EU on granting Union financial assistance to Portugal
(2012/658/EU)
THE COUNCIL OF THE EUROPEAN UNION,
gap of 1 % of GDP in 2012 compared with the budget
plans. While the faster-than-projected adjustment from
domestic demand to exports is welcome, it impacts on
Having regard to the Treaty on the Functioning of the European
budgetary execution in two ways. First, employment-
Union,
intensive domestic sectors, such as construction, are
affected most negatively and the resulting higher
unemployment weighs on social security budgets.
Having regard to Council Regulation (EU) No 407/2010 of
Second, the tax-intensity of production and consumption
11 May 2010 establishing a European financial stabilisation
is falling, leading to noticeable revenue shortfalls. The
mechanism ( 1 ), and in particular Article 3(2) thereof,
growth composition effect on revenue is compounded
by intra-category shifts away from higher-taxed items
such as consumer durables towards lower-taxed items
Having regard to the proposal from the European Commission,
of daily consumption. Also, the weakness in direct
taxation is exacerbated by negative bracket creep as
falling incomes are taxed at lower rates and tax
Whereas:
revenue on profits shrink. By contrast, expenditure has

overall developed according to plans, with higher-than-
budgeted savings on compensation for employees.
Budgetary execution is also benefitting from lower-
(1) In
line
with
Article
3(9)
of
Council
Implementing
than-expected interest payments and the reprogramming
Decision 2011/344/EU ( 2 ), the Commission, together
of Union Structural Funds. Although some one-off
with the International Monetary Fund (IMF) and in
factors could reduce the gap to about % of GDP in
liaison with the European Central Bank (ECB), has
2012, a large carry-over into 2013 and 2014 of approxi
conducted the fifth review of the Portuguese authorities’
mately 1 % of GDP would remain, making the fiscal
progress on the implementation of the agreed measures
programme targets over 2012-2014 unattainable.
under the economic and financial adjustment programme
(Programme) as well as of their effectiveness and
economic and social impact.
(2)
The rebalancing of the Portuguese economy is taking
(4)
In view of the large revenue shortfalls and the more
place at a faster-than-expected pace. The second quarter
subdued growth outlook, the deficit targets haven been
of 2012 brought a substantial quarter-on-quarter real
adjusted to 5,0 % of GDP in 2012, 4,5 % in 2013 and
gross domestic product (GDP) contraction of 1,2 %
2,5 % of GDP in 2014. As the fiscal gap is assessed to be
following a flat first quarter. For the year as a whole,
essentially outside the control of the government, a
the projected pace of the economic recession remains
revision of the targets to accommodate part of the
unchanged at – 3 %. The current account deficit is
shortfall seems appropriate. Even under the revised
declining more rapidly than anticipated, falling to 3 %
targets, significant consolidation efforts of 3 % and
of GDP in 2012 from nearly 10 % just two years ago.
1 % of GDP will be necessary in 2013 and 2014
This adjustment is taking place on the back of well-
respectively. In order to maintain the credibility of the
performing exports and a rapid fall in imports. Looking
Programme, some degree of front-loading of the
forward, economic activity will be affected by a dimin
adjustment is warranted.
ishing stimulus from external demand and the impact of
further budgetary consolidation. Consequently, GDP
growth has been revised downward by about 1
percentage point in both 2013 and 2014 to around
– 1 % and + 1 %.
(5) A
range
of
structural
spending
and
revenue
measures
underpin the revised fiscal targets. Measures worth %
of GDP should still be taken in 2012 in order to reach
(3) In
spite
of
a
rigorous
budget
implementation
on
the
the target of 5 % of GDP. This includes, inter alia,
expenditure side, data until July point to a budgetary
spending freezes and a frontloading of some of the
measures planned for 2013. For 2013, consolidation
( 1 ) OJ L 118, 12.5.2010, p. 1.
measures amounting to 3 % of GDP should be incor
( 2 ) OJ L 159, 17.6.2011, p. 88.
porated in the budget in order to achieve the target of

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EN
25.10.2012 Official
Journal
of
the
European
Union L
295/15
4,5 % of GDP. These include a further decrease in the
Specific Economic Policy Conditionality (Memorandum
wage bill mainly through the reduction of the number of
of Understanding) on the financial sector part is
public employees, a reduction in intermediate
proceeding in accordance with the envisaged objectives
consumption, a cut in social transfers, a further rational
to preserve financial stability. Efforts are still needed in
isation in the health sector, reduced spending on capital
some banks to meet the end of the year target for 2012
formation, as well as revenue increases achieved via a
of the Banco de Portugal of a Core Tier 1 ratio of 10 %.
reform of the personal income tax simplifying the tax
structure, broadening the base by eliminating some tax
benefits, increasing the average tax rate while improving
progressivity, broadening the corporate income tax base
by eliminating interest deductibility, raising excise taxes
and changing property taxation. For 2014, a compre
hensive expenditure review has been initiated with a
view to identifying spending cuts (of EUR 4 billion
(9) Progress
in
the
implementation
of
reforms
to
raise
over two years) in order to reach a budget deficit of
competitiveness, employment and the growth potential
2,5 % of GDP.
is broadly satisfactory. The revised Labour Code entered
into force in August 2012. Further important reforms in
the area of severance payment and collective bargaining
are planned by the end of September 2012. The
Portuguese Government has recently adopted a number
of active labour market policies aimed at improving the
functioning of public employment services, supporting
(6)
Instruments to control government expenses are being
employment creation, strengthening activation and
put in place. The new commitment control system is
offering more effective training opportunities. The
being implemented but full compliance needs to be
judiciary reforms in the areas of civil procedure and
ensured so as to avoid a further build-up of new
court organisation, which will speed up civil and
arrears. Budgetary fragmentation should be reduced and
commercial litigation and unclog the court system, are
costly inefficiencies are being tackled across a broad
progressing well. Steps have been taken to improve the
range. This includes containing losses of State-owned
framework for the recognition of professional qualifi
enterprises (SOEs), renegotiating public-private part
cations with the adoption of amendments to the law
nerships (PPP) and pushing for further savings in the
transposing Directive 2005/36/EC of the European
health sector.
Parliament and of the Council of 7 September 2005
on the recognition of professional qualifications ( 1 ) and
with the adoption by the Portuguese Government of a
law proposal aimed at improving the functioning of
highly regulated professions. Work on the implemen
tation of Directive 2006/123/EC of the European
(7) Under
the
Commission’s
current
projections
for
nominal
Parliament and of the Council of 12 December 2006
GDP growth (– 1,0 % in 2011, – 2,7 % in 2012, 0,3 % in
on services in the internal market ( 2 ) has advanced at a
2013 and 2,2 % in 2014) and the revised fiscal targets,
steady pace as regards sector-specific legislation, with the
the path for the debt-to-GDP ratio is expected as follows:
adoption of the remaining necessary sector-specific legis
107,8 % in 2011, 119,1 % in 2012, 123,7 % in 2013
lative amendments expected by the end of 2012. Further
and 123,6 % in 2014. The debt-to-GDP ratio would
efforts in the implementation of the Zero Authorisation
therefore be stabilised at below 124 % and be placed
initiative and the set-up of the Point of Single Contact
on a declining path in 2014, assuming further progress
provided for in Directive 2006/123/EC are essential to
in the reduction of the deficit. Debt dynamics are affected
reduce the administrative burden. With a view to facili
by several below-the-line operations, including sizeable
tating access to finance to small and medium-sized enter
acquisitions of financial assets, in particular for possible
prises (SMEs), the Portuguese Government is committed
bank recapitalisation and financing to SOEs and
to adopt, if necessary, a number of additional initiatives,
differences between accrued and cash interest payments.
including mechanisms to strengthen the export orien
tation of SMEs.
(8) The
liquidity
and
the
solvency
conditions
of
the
banking
system have improved since the fourth review, reflecting
the ongoing deleveraging, the exceptional liquidity
(10) Building on the independent report on the main national
support provided by the Eurosystem, and a capital
regulator authorities, Portugal will prepare a framework
augmentation worth over EUR 7
billion. Banks
law that protects the public interest and promotes market
presented their updated funding and capital plans (4th
efficiency. The framework law shall guarantee the regu
edition). Albeit slightly less optimistic on deposits
lators’ independence and financial, administrative and
growth, all banks foresee to meet the indicative loan-
to-deposit target of 120 % by 2014. Overall, the imple
( 1 ) OJ L 255, 30.9.2005, p. 22.
mentation of the Memorandum of Understanding on
( 2 ) OJ L 376, 27.12.2006, p. 36.

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L 295/16
EN
Official Journal of the European Union
25.10.2012
management autonomy to exercise their responsibilities,
this effect, Portugal shall freeze some of the 2012
in full compliance with Union law. The framework law
budget appropriations for investment projects not yet
shall also contribute towards the effectiveness of the
initiated; increase stamp duties on high value prop
Competition Authority in enforcing competition rules,
erties; raise tax rates on investment income; frontload
thereby supporting and complementing the effect of
some of the 2013 budget measures affecting social
the recently adopted Competition Law.
benefits; implement additional measures generating
savings in intermediate consumption and raising
other revenues in order to secure the deficit target for
(11) The fifth update of the Memorandum of Understanding
2012;
includes a full section on promoting a business-friendly
licensing environment which provides a more detailed
calendar and specific milestones in the revision of
some important legal regimes such as environment and
(b) Portugal shall aim to reduce expenditure in 2012 by at
territorial planning, industrial, commercial and tourism
least EUR 6,8 billion including by reducing public
licensing.
sector wages and employment; making cuts in
pensions; carrying out a comprehensive reorganisation
of the central administration, eliminating redundancies
(12) In the light of these developments, Implementing
and other inefficiencies; reducing transfers to SOEs;
Decision 2011/344/EU should be amended,
reorganising and reducing the number of municipalities
and parishes; making cuts in education and health;
lowering transfers to regional and local authorities;
HAS ADOPTED THIS DECISION:
and reducing capital expenditure and other expenditure
as set out in the Programme;
Article 1
Article 3 of Implementing Decision 2011/344/EU is hereby
amended as follows:
(c) on the revenue side, Portugal shall implement revenue
measures of at least EUR 3 billion, including by broa
dening VAT bases through the reduction of exemptions
(1) paragraphs 3 and 4 are replaced by the following:
and the rearranging of the lists of goods and services
subject to reduced, intermediate and higher rates;
increasing excise taxes; broadening the corporate and
‘3. The
general
government
deficit
shall
not
exceed
5,9
%
personal income tax bases by reducing tax deductions
of GDP in 2011, 5,0 % in 2012, 4,5 % of GDP in 2013 and
and special regimes; ensuring the convergence of
2,5 % of GDP in 2014 in line with the revised excessive
personal income tax deductions applied to pensions
deficit procedure requirements. For the calculation of this
and labour income; and changing property taxation
deficit, the possible budgetary costs of bank support
by substantially reducing exemptions. These measures
measures in the context of the Portuguese Government’s
shall be complemented by action to fight tax evasion,
financial sector strategy shall not be taken into account.
fraud and informality;
Consolidation shall be achieved by means of high-quality
permanent measures and minimising the impact of consoli
dation on vulnerable groups.
(d) Portugal shall continue adopting measures to reinforce
public finance management. Portugal shall implement
4. Portugal
shall
adopt
the
measures
specified
in
para
the measures provided for in the new Budgetary
graphs 5 to 8 before the end of the indicated year, with
Framework Law, including setting up a medium-term
exact deadlines for the years 2011-2014 being specified in
budgetary framework. The local and regional budgetary
the Memorandum of Understanding. Portugal shall stand
frameworks shall be considerably strengthened, in
ready to take additional consolidation measures to reduce
particular by aligning the respective financing laws
the deficit to below 3 % of GDP by 2014 in case of devi
with the requirements of the Budgetary Framework
ations from targets.’;
Law. Portugal shall step up the reporting and moni
toring of public finances and reinforce budgetary
execution rules and procedures. The Portuguese
(2) paragraphs 6 to 9 are replaced by the following:
Government shall apply the strategy for the validation
and settlement of arrears and step up the implemen
tation of the commitment control law to prevent the
‘6. Portugal
shall
adopt
the
following
measures
during
creation of new arrears. Portugal shall implement the
2012, in line with specifications in the Memorandum of
new legal and institutional PPPs framework. No PPP
Understanding:
shall be launched until the new framework is fully
effective. Based on a study prepared by an international
auditing firm, Portugal shall develop a detailed strategic
(a) the general government deficit shall not exceed 5,0
%
plan, in full compliance with applicable Union law
of GDP in 2012. Portugal shall continue to closely
including public procurement law, with a view to
monitor fiscal developments and implement further
obtaining substantial fiscal gains, while minimising
policy adjustments to achieve the 2012 target. To
the debt burden and ensuring sustainable reduction of

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25.10.2012 Official
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of
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European
Union L
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government liabilities. Portugal shall adopt a law to
Judicial Reform Map and by applying targeted measures
regulate the creation and the functioning of SOEs at
to progressively eliminate the court backlog and to
central, regional and local levels;
foster alternative dispute resolution;
(e) Portugal shall apply the new legislation to reorganise
and significantly reduce the number of local
government entities. These changes shall come into
effect by the beginning of the next local election
(o) Portugal shall continue opening up its economy to
cycle. In addition, Portugal shall enhance efforts to
competition. The Portuguese Government shall take
streamline the public sector by reducing entities and
the necessary measures to ensure that obstacles to
improving task sharing at all levels of government;
free movement of capital will not be created by their
action and, in particular, that the Portuguese State or
(f) Portugal
shall
deepen
the
reform
of
the
revenue
admin
any public body does not conclude, in a shareholder
istration by reinforcing the links between the
capacity, agreements which may hinder the free
Autoridade Tributária e Aduaneira and the revenue
movement of capital or influence the management
collection units of the Social Security, reducing the
control of companies. The functioning of professional
number of municipal offices and addressing
services shall be fostered by improving the framework
remaining bottlenecks in the tax appeal system;
for recognition of professional qualifications and by
eliminating unnecessary restrictions on regulated
(g) Portugal shall implement the financial arrangement
professions. In construction and real estate activities,
with the RAM;
Portugal shall make the requirements for cross-border
providers less burdensome and review obstacles to the
establishment of service providers;
(h) Portugal shall adopt measures to improve the efficiency
and sustainability of SOEs at central, regional and local
level. Portugal shall explore options in order to manage
the heavy debt load of SOEs, including Parpública, and
to ensure improved conditions for market financing.
(p) the competition and regulatory framework shall be
Portugal shall aim to reach operational balance at
improved. Portugal shall reinforce the independence,
sector level by the end of 2012;
autonomy and governance of the main national regu
latory authorities; implement the Competition Law with
(i) Portugal
shall
continue
implementing
the
privatisation
a view to improving the speed and effectiveness of the
programme. The direct sale of Caixa Geral de
enforcement of competition rules; and monitor the
Depósitos’ (CGD) insurance arm, Caixa Seguros, is
inflow of new cases and report on the functioning of
ongoing;
the specialised court for competition, regulation and
supervision;
(j) the Portuguese Government shall submit draft legis
lation to the Portuguese Parliament to align severance
payments with the Union average of 8 to 12 days per
year of work and to create a compensation fund for
severance payments;
(q) in the energy sector, Portugal shall take measures to
facilitate market entry and promote the establishment
(k) Portugal shall promote wage developments consistent
of the Iberian gas market and shall take further steps
with the objectives of fostering job creation and
towards fully transposing the Third EU Energy Package.
improving firms’ competitiveness with a view to
To ensure the independence and autonomy and powers
correcting macroeconomic imbalances. Over the
of the national regulatory authority provided for in the
Programme period, any increase in minimum wages
Third EU Energy Package, Portugal shall adopt the new
shall take place only if justified by economic and
regulators’ by-laws, as agreed in July 2012 with the
labour market developments. Measures shall be taken
Commission, the ECB and the IMF, by the third
to address weaknesses in the current wage bargaining
quarter of 2012, and shall ensure that they are
schemes, including legislation to redefine the criteria
effective before the end of 2012 in time for the liberali
and modalities of the extension of collective
sation of the electricity and gas market. Portugal shall
agreements and to facilitate firm-level agreements.
take measures to review the support and compensation
Until then, collective agreements shall not be extended;
schemes for the production of electricity. Portugal shall
take measures to reduce excessive rents and eliminate
(l) Portugal
shall
continue
to
improve
the
effectiveness
of
the tariff debt by 2020, focusing on compensation
its active labour market policies in line with the results
schemes for power guarantee, special regime
of the assessment report and the action plan to
(renewables — excluding those granted under tender
improve the functioning of the public employment
mechanisms — and cogeneration), and the ordinary
services;
regime (CMECs and CAEs);
(m) Portugal shall implement the measures set out in its
action plans to improve the quality of secondary and
vocational education and training;
(r) in
other
network
industries,
in
particular
transport,
tele
communications and postal services, Portugal shall
(n) the functioning of the judicial system shall be improved
adopt additional measures to promote competition
by implementing the measures proposed under the
and flexibility;

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Official Journal of the European Union
25.10.2012
(s) Portugal
shall
adopt
a number
of measures
with
a
view
European Parliament and of the Council of 16 February
to increase the efficiency of the licensing schemes for
2011 on combating late payment in commercial trans
territorial planning, industrial and commercial licensing
actions (***);
and tourism. In addition, the Portuguese Government
shall analyse and fast-track applications for the
licensing of planned investment projects which are
(f) Portugal shall adapt the content and the information
left unresolved or undecided for more than 12 months;
available at the PSC in respect of the rules applicable
to the 44 specific sectors that were amended to ensure
(t) Portugal
shall
prepare
an
action
plan
with
measures
to
compliance with Directive 2006/123/EC, and shall
facilitate access to finance and to export markets for
adapt the content and information available at the
companies, in particular for SMEs.
PSC in respect of the rules applicable to the 13
specific sectors that were amended to ensure compliance
7. Portugal
shall
adopt
the
following
measures
during
with Directive 2005/36/EC;
2013, in line with specifications in the Memorandum of
Understanding:
(g) Portugal shall continue implementing its privatisation
(a) the general government deficit shall not exceed 4,5 % of
programme, which shall be expanded to include
GDP in 2013. The 2013 budget shall include
additional companies and assets to the ones identified
permanent consolidation measures of at least 3 % of
in the Memorandum of Understanding for sale or
GDP aiming at reducing the general government
concession in 2013.
deficit within the timeframe referred to in paragraph
3. The Portuguese Government shall explore ways to
increase the weight of expediture reduction in the
8. The
general
government
deficit
shall
not
exceed
2,5
%
overall consolidation package for 2013 in order to
of GDP in 2014. To achieve this objective, Portugal shall
ensure a medium-term growth-friendly fiscal adjustment
apply a thorough expenditure-reducing plan worth approxi
tilted towards the expenditure side. The Portuguese
mately EUR 4 billion over 2014-2015. A comprehensive
Government shall use contingency measures in the
expenditure review to fully specify the additional sources
course of 2013 in case of slippages given possible
of savings shall be carried out for the sixth review and
implementation risks;
measures shall be fully specified by February 2013. The
fiscal consolidation plans for 2014-2015 shall be fully
(b) the 2013 budget shall include revenue measures such as
defined in the 2013 Stability Programme.
reforming the personal income tax by simplifying the
tax structure, broadening the tax base through the elim
ination of some tax benefits and increasing the average
9. With
a
view
to
restoring
confidence
in
the
financial
tax rate while improving progressivity; broadening the
sector, Portugal shall aim to maintain an adequate level of
corporate income tax base, increasing investment
capital in its banking sector and ensure an orderly
income tax rate; increasing excise taxes and introducing
deleveraging process. In that regard, Portugal shall
changes in property taxation;
implement the strategy for the Portuguese banking sector
agreed with the Commission, the ECB and the IMF so that
(c) on the expenditure side, the 2013 budget shall identify
financial stability is preserved. In particular, Portugal shall:
measures such as lowering expenditure in the central
administration, education, health and social benefits;
streamlining public and private social transfers and
(a) advise banks to strengthen their collateral buffers on a
subsidies; reducing transfers to local and regional auth
sustainable basis;
orities; reducing the wage bill by decreasing permanent
and temporary staff and reducing overtime pay; and
lowering operational and capital expenditures by SOEs;
(b) ensure that banks reach the Programme target of the
Core Tier 1 ratio of 10 % at the latest by the end of
(d) Portugal shall complete the elimination of the court
2012;
backlog;
(e) Portugal shall improve the business environment by
(c) ensure a balanced and orderly deleveraging of the
reducing administrative burden through the extension
banking sector, which remains critical in permanently
of simplification reforms [Points of Single Contact
eliminating funding imbalances. Banks’ funding plans
(PSC) and “Zero Authorisation” projects] to all sectors
aim at reducing the loan-to-deposit ratio to an indicative
of the economy. In particular, Portugal shall adapt the
value of approximately 120 % in 2014 and reducing the
content and the information available at the PSC to
reliance on Eurosystem funding in the medium-term.
ensure compliance with Directive 2006/123/EC of the
Those funding plans shall be reviewed quarterly;
European Parliament and of the Council of 12 December
2006 on services in the internal market (*) and with
Directive 2005/36/EC of the European Parliament and
(d) continue to streamline the State-owned CGD;
of the Council of 7 September 2005 on the recognition
of professional qualifications (**). Portugal shall alleviate
the credit constraints of SMEs, including through the
(e) optimise the process for recovering the assets trans
implementation of Directive 2011/7/EU of the
ferred from BPN to the three State-owned special

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25.10.2012 Official
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Union L
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purpose vehicles through the outsourcing to a profes
(h) establish a framework for financial institutions to
sional third party of the management of the assets, with
engage in out-of-court debt restructuring for households
a mandate to gradually recover the assets over time. The
and SMEs and implement an action plan to raise public
Portuguese Government shall select the party managing
awareness of the restructuring tools.
the credits through a competitive bidding process and
include adequate incentives to maximise the recoveries
___________
and minimise operational costs into the mandate. The
(*) OJ L 376, 27.12.2006, p. 36.
Portuguese Government shall ensure timely disposition
(**) OJ L 255, 30.9.2005, p. 22.
of the subsidiaries and the assets in the other two State-
(***) OJ L 48, 23.2.2011, p. 1.’;
owned special purpose vehicles;
(3) the following paragraph is added:
(f) on the basis of the set of preliminary proposals to
‘10. In
order
to
ensure
the
smooth
implementation
of
encourage the diversification of financing alternatives
the Programme’s conditionality, and to help to correct
to the corporate sector presented, develop and
imbalances in a sustainable way, the Commission shall
evaluate the different options put forward with a view
provide continued advice and guidance on fiscal, financial
to setting priorities. The Portuguese Government shall
market and structural reforms. Within the framework of the
assess the effectiveness of Union-compatible
assistance to be provided to Portugal, together with the IMF
government-sponsored export credit insurance schemes
and in liaison with the ECB, the Commission shall period
with a view to taking appropriate measures to promote
ically review the effectiveness and economic and social
exports;
impact of the agreed measures, and shall recommend
necessary corrections with a view to enhancing growth
and job creation, securing the necessary fiscal consolidation
(g) ensure the initial and periodical funding arrangements
and minimising harmful social impacts, particularly on the
for the Resolution Fund in two steps, first by the
most vulnerable parts of Portuguese society.’.
approval of a decree-law on the banks’ contributions
to the Resolution Fund by November 2012, and
Article 2
secondly by the approval of a supervisory notice on
This Decision is addressed to the Portuguese Republic.
the specific periodic contributions by banks one
month later; adopt the supervisory notices on recovery
plans by the end of October 2012; adopt the regulation
on resolution plans by the end of November 2012; and
Done at Luxembourg, 9 October 2012.
adopt the rules applicable to setting-up and operation of
bridge banks in line with Union competition rules by
For the Council
the end of October 2012. Priority shall be given to the
review of the recovery and subsequent resolution plans
The President
of the banks that are of systemic importance;
V. SHIARLY

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