HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN"L 46/40
EN
Official Journal of the European Union
17.2.2012
DECISIONS
COUNCIL IMPLEMENTING DECISION
of 14 December 2011
amending Implementing Decision 2011/344/EU on granting Union financial assistance to Portugal
(2012/92/EU)
THE COUNCIL OF THE EUROPEAN UNION,
(3) The
quarterly
quantitative
performance
criterion
on
the
general government cash balance for the second quarter
of 2011 was met and preliminary data suggest that this
was also the case in the third quarter of 2011. However,
Having regard to the Treaty on the Functioning of the European
with the information available as of early November, on
Union,
a European Systems of Accounts (ESA95) basis, a
budgetary gap of around 1,5 % of GDP is projected for
2011 as a whole. Part of this fiscal gap had been ascer
tained by August, in particular due to current expen
Having regard to Council Regulation (EU) No 407/2010 of
diture overruns, lower-than-projected current non-tax
11 May 2010 establishing a European financial stabilisation
revenue and higher-than-budgeted capital spending. The
mechanism ( 1 ), and in particular Article 3(2) thereof,
Portuguese Government had taken some measures to
narrow this gap, namely a one-time surcharge in
personal income tax and an increase in the VAT rate
for natural gas and electricity, which was brought
Having regard to the proposal from the European Commission,
forward to 1 October 2011 from 2012. But these
measures were not sufficient to close the fiscal gap,
particularly as further slippages have been identified
more recently, including higher interest payment,
Whereas:
lower-than-projected capital revenue and sales of real
estate. The Portuguese Government is seeking an
agreement with the banks on a partial transfer of their
pension funds to the State social security system, to be
(1) Upon
a
request
by
Portugal,
the
Council
granted
financial
undertaken in full compliance with the Union State aid
assistance to it (Council Implementing Decision
rules, and to be used exceptionally to meet the deficit
2011/344/EU ( 2 )) in support of a strong economic and
target of 5,9 % of GDP in 2011. The Portuguese
financial adjustment programme (Programme) aiming at
Government agreed not to rely on further transfers of
restoring confidence, enabling the return of the economy
pension funds to meet the Programme targets for the
to sustainable growth, and safeguarding financial stability
coming years.
in Portugal, the euro area and the Union.
(2) Under
the
Commission’s
current
projections
for
nominal (4) Progress
is
being
made
to
strengthen
public
financial
Gross Domestic Product (GDP) growth (– 0,6 % in 2011,
management through improved reporting and moni
– 1,9 % in 2012, 1,9 % in 2013 and 3,9 % in 2014), the
toring, and reforming the budgetary framework in line
fiscal adjustment path is in line with the Council Recom
with the recommendations from Commission services
mendation to Portugal of 2 December 2009 with a view
and International Monetary Fund (IMF) staff.
to bringing an end to the situation of an excessive
government deficit, pursuant to Article 126(7) of the
Treaty, and consistent with a path for the debt-to-GDP
ratio of 107,2 % in 2011, 116,2 % in 2012, 118,1 % in
2013 and 116 % in 2014. The debt-to-GDP ratio would
(5)
The stock of arrears should be significantly reduced over
therefore be stabilised in 2013 and be placed on a
the Programme period. To this end, a strategy for the
declining path thereafter, assuming further progress in
validation and settlement of arrears for the entities inside
the reduction of the deficit. Debt dynamics are affected
the general government as well as for SOEs classified
by several below-the-line operations, including sizeable
outside the general government should be prepared. In
acquisitions of financial assets, in particular for possible
this strategy, a roadmap should be provided which sets
bank recapitalisation and financing to state-owned enter
out how and when the stock of arrears should be stabi
prises (SOEs) and differences between accrued and cash
lised. Moreover, various options of settling arrears should
interest payments.
be explored, providing appropriate incentive mechanisms
including the potential of rebates for early settlements
( 1 ) OJ L 118, 12.5.2010, p. 1.
and rewarding entities that no longer accumulate new
( 2 ) OJ L 159, 17.6.2011, p. 88.
arrears.

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EN
17.2.2012 Official
Journal
of
the
European
Union L
46/41
(6)
Given the significant drag that the Autonomous Region
(1) paragraph 3 is replaced by the following:
of Madeira has exerted on Portuguese public finances, the
Portuguese Government should prepare a financial
arrangement with that region with a view to containing
the high level of fiscal risks still remaining. The
‘3. The
general
government
deficit
shall
not
exceed
EUR
arrangement should be designed in line with the
10 068 million (equivalent to 5,9 % of GDP based on
Programme and comprise, among others, a debt sustain
current projections) in 2011, EUR 7 645 million (4,5 % of
ability analysis.
GDP) in 2012 and 3,0 % of GDP by 2013 in line with the
excessive deficit procedure requirements. For the calculation
of this deficit, the possible budgetary costs of bank support
(7) Portuguese
banks
are
to
work
towards
meeting
the
measures in the context of the Portuguese Government’s
higher capital requirements as stipulated by the
financial sector strategy shall not be taken into account.
Programme, taking also into account the implications
Consolidation shall be achieved by means of high-quality
deriving from the European Banking Authority-led
permanent measures and minimising the impact of consoli
exercise based on the valuation of sovereign exposures
dation on vulnerable groups.’;
according to end-September market prices, the special
on-site inspection programme and the transfer of
banks’ pension funds to the State social security
system. A legal framework, the purpose of which is to
(2) paragraph 5 is amended as follows:
provide temporary public support to banks, is under
preparation. A balanced and orderly deleveraging of the
banking sector remains critical, while safeguarding
adequate credit for the productive sectors of the
(a) points (a) and (b) are replaced by the following:
economy. The sale of Banco Português de Negócios is
in its final stage although the transaction still needs
clearance from the Union competition authorities.
Progress has also been made to strengthen the super
‘(a) 2011 fiscal deficit target shall be reached by an
visory and regulatory framework, including via
exceptional measure. Assets acquired as a result of
technical assistance.
the transfer of banks pensions funds to the State

social security system shall not be used in a way
detrimental to long-term sustainability of
Portuguese public finances;
(8) Progress
in
labour
and
product
market
reforms
is
essential to restore competitiveness and raise the
growth potential. Labour market reforms to align the
protection and rights under fixed and open-ended
(b) Portugal shall adopt measures to reinforce public
contracts and to establish an employer-financed fund
finance management. Portugal shall implement the
for paying out workers’ severance entitlements are
measures provided for in the new Budgetary
advancing. The privatisation programme is being imple
Framework Law, including setting up a medium-
mented under the new framework law for privatisation.
term budgetary framework and establishing an
A deep and urgent restructuring of SOEs is at the top of
independent Fiscal Council. The budgetary
the Portuguese Government’s agenda. Further progress is
framework at local and regional levels shall be
needed to lower entry barriers to the sheltered sectors
considerably strengthened, in particular by putting
with a view to fostering competition and reduce
forward the key options for the alignment of the
excessive rents. Structural reforms should be imple
respective financing laws to the requirements of the
mented decisively and closely monitored.
Budgetary Framework Law. Portugal shall step up
reporting and monitoring of public finances and
reinforce budgetary execution rules and procedures.
(9) Notwithstanding
the
relatively
large
first
and
second
The Portuguese Government shall prepare a strategy
disbursements, the Portuguese Government’s cash
for the validation and settlement of arrears which is
position remains under strain. This is explained by
to present a roadmap setting out how and when
increasing financing needs from SOEs, a sharp increase
the stock of arrears is to be stabilised and explore
in households’ redemption of savings certificates, and
various options of settling arrears. Regarding
persisting financial market stress.
Public Private Partnerships (PPPs), the Portuguese
Government shall not enter into any new PPPs
before the study results on existing PPPs envisaged
(10) In
light
of
these
developments,
Implementing
Decision
in the Programme and the legal and institutional
2011/344/EU should be amended,
reforms proposed become available;’;
HAS ADOPTED THIS DECISION:
(b) point (e) is replaced by the following:
Article 1
Article 3 of Implementing Decision 2011/344/EU is hereby
‘(e) Portugal shall continue opening up the economy to
amended as follows:
competition. The Portuguese Government shall take

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L 46/42
EN
Official Journal of the European Union
17.2.2012
the necessary measures to ensure that the
reductions in capital expenditure and in other
Portuguese State or any public body does not
expenditure as set out in the Programme;
conclude, in a shareholder capacity, agreements
which may hinder the free movement of capital
(d) on the revenue side, the budget shall include
or influence the management control of companies.
revenue measures totalling around EUR 2,1 billion
The new Privatisation Law shall also be respectful of
in a full year, including by broadening VAT bases
the principles of free movement of capital and not
through reducing exemptions and rearranging the
grant or allow special rights to the State. A revision
lists of goods and services subject to reduced, inter
of competition law shall be undertaken aiming at
mediate and higher rates; an increase in excise taxes;
improving the speed and effectiveness of
broadening the corporate and personal income tax
enforcement of competition rules;’;
bases by reducing tax deductions and special
regimes; ensuring the convergence of personal
(c) point (h) is replaced by the following:
income tax deductions applied to pensions and
labour income; and changes in property taxation
by substantially reducing exemptions. These
‘(h) Portugal shall prepare a financial arrangement with
measures shall be complemented by action to
the Autonomous Region of Madeira (RAM)
fight tax evasion, fraud and informality;’;
consistent with the Programme. Until the
agreement of that arrangement and its implemen
(b) points (k) and (l) are replaced by the following:
tation in the RAM budget, Portugal shall closely
monitor the execution of the RAM budget, shall
keep transfers from the State to the RAM
‘(k) Portugal shall promote wage developments
government suspended and shall not honour any
consistent with the objectives of fostering job
new commercial or financial debt or guarantees
creation and improving firms’ competitiveness
by the RAM government and its SOEs that are
with a view to correcting macroeconomic imbal
not approved by the Ministry of Finance.’;
ances. Over the Programme period, any increase
in minimum wages shall take place only if
justified by economic and labour market devel
(3) paragraph 6 is amended as follows:
opments. Measures shall be taken to address weak
nesses in the current wage bargaining schemes,
including legislation to redefine the criteria and
(a) points (a) to (d) are replaced by the following:
modalities of the extension of collective agreements
and to facilitate firm-level agreements. Until then,
the application of extensions shall be suspended;
‘(a) Portugal shall implement the privatisation
programme. In particular, the sale of public sector
shares in EDP shall be completed in 2012. In
(l) an action plan shall be prepared to improve the
addition, the public sector shares in REN and
quality of secondary and vocational education and
GALP, and, if market conditions permit, TAP,
training;’;
shall be sold in 2012. A strategy for Parpublica
shall be prepared, reconsidering the role of
(c) the following point is added:
Parpublica as a public company and considering
the possibility of winding down the company or
consolidating it with the general government. The
‘(p) Portugal shall adopt measures to ensure the sustain
privatisation plan through 2013 shall also cover
ability of the national electricity system leading to
Aeroportos de Portugal, the freight branch of
the elimination of the tariff debt by 2020 and
Comboios de Portugal, Correios de Portugal and
ensuring it shall stabilise by 2013. These
Caixa Seguros, as well as a number of smaller firms;
measures shall correct excessive rents and cover
all their sources.’;
(b) the measures defined in points (c) and (d),
(4) paragraph 7 is amended as follows:
amounting to at least EUR 8,8 billion, shall be
included in the 2012 budget. Further measures,
mostly on the expenditure side, shall be taken to
(a) points (a) and (b) are replaced by the following:
fill any possible gap arising from budgetary devel
opments in 2012;
‘(a) the 2013 budget shall include fiscal consolidation
measures amounting to at least EUR 3,4 billion
(c) the budget shall provide for a reduction of expen
aiming at a reduction of the general government
diture in 2012 of at least EUR 6,7 billion including
deficit within the timeframe referred to in
a reduction in public sector wages and
Article 3(3);
employment; cuts in pensions; a comprehensive
reorganisation of the central administration, elim
(b) the budget shall include revenue measures including
inating duplicities and other inefficiencies;
in particular further broadening of corporate and
reducing the number of municipalities and
personal income tax bases, higher excises taxes
parishes; cuts in education and health; lower
and changes in property taxation, yielding close to
transfers to regional and local authorities; and
EUR 0,7 billion of additional revenue;’;

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EN
17.2.2012 Official
Journal
of
the
European
Union L
46/43
(b) the following points are added:
reach the capital requirement thresholds on time,
they might temporarily require public provision of
capital, which for privately owned banks shall be
‘(d) on the expenditure side, the budget shall provide
available through the EUR 12 billion bank solvency
for a reduction of at least EUR 2,7 billion, including
support facility established under the Programme;
reducing expenditures in the central administration,
education and health; transfers to local and regional
authorities; reduction of the number of employees
(c) ensure a balanced and orderly deleveraging of the
in the public sector; and lower costs by SOEs;
banking sector, which remains critical to elim
inating funding imbalances on a permanent basis.
Banks’ funding plans aim at a reduction in the loan-
(e) Portugal shall improve the business environment by
to-deposit ratio to around 120 % by the end of the
reducing administrative burden through the
Programme and a reduction of the reliance on
extension of simplification reforms (Points of
Eurosystem funding during the duration of the
Single Contact and ‘Zero Authorisation’ projects)
Programme. These funding plans shall be reviewed
to all sectors of the economy; and by alleviating
quarterly, with the next one due before the third
credit constraints of small and medium-sized enter
Programme review. The Bank of Portugal shall take
prises, including through the implementation of
appropriate action in case of deviations from the
Directive 2011/7/EU of the European Parliament
banks’ funding plans;
and of the Council of 16 February 2011 on
combating late payment in commercial trans
actions (*).
(d) complete the sale of Banco Português de Negócios
respecting the Union State aid rules;
___________
(*) OJ L 48, 23.2.2011, p. 1.’;
(e) ensure that the state-owned Caixa Geral de
Depósitos (CGD) is streamlined to increase the
capital base of its core banking arm as needed in
2011 without relying on the sale of its insurance
(5) paragraph 8 is amended as follows:
arm. This sale is expected to take place in 2012
directly to a final buyer and to contribute to
meeting that year’s additional capital needs.
(a) the introductory wording is replaced by the following:
Insofar as these needs cannot be met from
internal group sources, CGD shall be provided
with government capital support outside of the
‘8. With
a
view
to
restoring
confidence
in
the
bank solvency support facility;
financial sector, Portugal shall adequately recapitalise
its banking sector and ensure an orderly deleveraging
process. In that regard, Portugal shall develop and agree
(f) ensure
that
the
partial
transfer
of
the
banks’
pension
with the Commission, the ECB and the IMF a strategy
funds to the State social security system is done
for the future structure and functioning of the
under actuarially balanced conditions, as well as
Portuguese banking sector so that financial stability is
respecting Union competition and State aid rules.
preserved. In particular, Portugal shall:’;
In order to avoid having to take recourse to the
bank solvency support within the Programme
financing envelope, the Portuguese Government
(b) points (a) to (g) are replaced by the following:
shall offer banks help to cover the impact of the
transfer on capital by using part of the transfer to
acquire common equity in the banks. The
‘(a) advise banks to strengthen their collateral buffers
remainder of the transferred funds shall be
on a sustainable basis and monitor the issuance
deposited in a blocked account until the completion
of the government guaranteed bank bonds, which
of the third Programme review;
has been authorised up to EUR 35 billion in line
with Union State aid rules;
(g) finalise the legal framework for access to capital
from public sources by end-January 2012
(b) follow closely the plans presented by the banks to
consistent with Union State aid rules and in line
reach a core Tier 1 ratio of 9 % by end-2011 and
with the principles laid down in the Memorandum
10 % at the latest by end-2012. The capital
of Understanding;’;
requirements stemming from valuing sovereign
debt based on market prices according to the
European Banking Authority shall be met in June
(c) the following points are added:
2012 together with the capital implications from
the special on-site inspections programme and the
transfer of the banks’ pension funds to the State
‘(i) ensure that before the third Programme review
social security system. Banks shall present in
banks have incorporated the available results of
February 2012 plans on how they intend to reach
the special on-site inspections programme in the
their capital needs in that year. If banks cannot
stress test exercise with a 6 % Core Tier 1 threshold;

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Official Journal of the European Union
17.2.2012
(j) complete the legal framework for early intervention,
necessary fiscal consolidation and minimising harmful social
resolution and deposit insurance for banks by end-
impacts, particularly on the most vulnerable parts of
2011 and by the same deadline the one for
Portuguese society.’.
corporate and household debt restructuring.’;
(6) paragraph 9 is replaced by the following:
Article 2
This Decision is addressed to the Portuguese Republic.
‘9. In
order
to
ensure
the
smooth
implementation
of
the
Programme’s conditionality, and to help to correct
imbalances in a sustainable way, the Commission shall
provide continued advice and guidance on fiscal, financial
Done at Brussels, 14 December 2011.
market and structural reforms. Within the framework of the
assistance to be provided to Portugal, together with the IMF
and in liaison with the ECB, it shall periodically review the
For the Council
effectiveness and economic and social impact of the agreed
measures, and shall recommend necessary corrections with
The President
a view to enhancing growth and job creation, securing the
M. DOWGIELEWICZ

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