HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN"L 240/8
EN
Official Journal of the European Union
16.9.2011
DECISIONS
COUNCIL IMPLEMENTING DECISION
of 2 September 2011
amending Implementing Decision 2011/344/EU on granting Union financial assistance to Portugal
(2011/541/EU)
THE COUNCIL OF THE EUROPEAN UNION,
106,2 % in 2012, 107,3 % in 2013 and 106,4 % in
2014. The debt-to-GDP ratio would therefore be
stabilised in 2013 and be placed on a declining path
thereafter, assuming further progress in the reduction
Having regard to the Treaty on the Functioning of the European
of the deficit. Debt dynamics are affected by several
Union,
below-the-line operations, including sizeable acquisitions
of financial assets, in particular for possible bank recap
italisation and financing to state-owned enterprises
(‘SOEs’) and differences between accrued and cash
Having regard to Council Regulation (EU) No 407/2010 of
interest payments.
11 May 2010 establishing a European financial stabilisation
mechanism ( 1 ), and in particular Article 3(2) thereof,
(4) The
quarterly
quantitative
performance
criterion
on
the
Having regard to the proposal from the European Commission,
general government cash balance for the first half of
2011 was met. However, recent data pointed to an
opening gap between fiscal trends and the 2011 deficit
targets. Expenditure overruns in the first half of the year,
Whereas:
underperforming non-tax revenue, the reclassification of
some operations led to a projected shortfall of about
1,1 % of GDP over the whole of 2011. The net costs
related to the sale of Banco Português de Negócios
(1) Upon
a
request
by
Portugal,
the
Council
granted
it
(‘BPN’) would add another 0,2 % of GDP to the
financial assistance (Implementing Decision
headline deficit. The authorities have reacted promptly.
2011/344/EU ( 2 )) in support of a strong economic and
Budget execution has been tightened, a one-time
financial reform programme aiming at restoring
surcharge on the personal income tax has been
confidence, enabling the return of the economy to
introduced, increases in the VAT rates of natural gas
sustainable growth, and safeguarding financial stability
and electricity have been brought forward from 2012
in Portugal, the euro area and the Union.
and sales of concessions will be stepped up. The
authorities should also seek to adopt other consolidation
measures of a permanent nature and/or frontload other
measures planned for next year. The ongoing process of
(2) In
line
with
Article
3(9)
of
Implementing
Decision
a phased transfer of banks pension funds to the State
2011/344/EU, the Commission, together with the Inter
social security system should exceptionally provide a
national Monetary Fund (‘IMF’) and in liaison with the
buffer towards meeting the deficit target for 2011. The
European Central Bank (‘ECB’), has conducted the first
acquired assets of these pension funds should not be
review of the authorities’ progress on the implementation
used in a way detrimental to long-term fiscal sustain
of the agreed measures as of the effectiveness and
ability. The government should not count on further
economic and social impact of those measures.
transfers of pension funds to meet the targets for the
coming years. Progress is being made to strengthen
public financial management through improved
reporting and monitoring and reforming the budgetary
(3) Under
the
Commission’s
current
projections
for
nominal
framework, in line with the recommendations from the
GDP growth (-0,7 % in 2011, 0,0 % in 2012, 2,5 % in
Commission services and IMF staff.
2013 and 3,9 % in 2014), the fiscal adjustment path is in
line with the Council Recommendation to Portugal of
2 December 2009 with a view to bringing an end to
the situation of an excessive government deficit, pursuant
to Article 126(7) of the Treaty, and is consistent with a
(5) Banks
are
working
towards
meeting
the
higher
capital
path for the debt-to-GDP ratio of 101,1 % in 2011,
requirements as required by the programme. Existing
legislation is being amended to strengthen the
( 1 ) OJ L 118, 12.5.2010, p. 1.
augmented solvency support facility. A balanced and
( 2 ) OJ L 159, 17.6.2011, p. 88.
orderly deleveraging of the banking sector remains

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EN
16.9.2011 Official
Journal
of
the
European
Union L
240/9
critical, while safeguarding adequate credit for dynamic
‘(a) Portugal shall implement fully the fiscal consoli
sectors to spur growth. A buyer for BPN has been found
dation measures foreseen in the 2011 budget
although the deal still needs clearance from Union
amounting to around EUR 9 billion and the addi
competition authorities. Progress has also been made to
tional consolidation measures that the government
strengthen the supervisory and regulatory framework,
has announced since then. To offset adverse
including via technical assistance. Portuguese banks
budgetary trends and emerging risks to the
passed the July 2011 European Banking Authority
achievement of the 2011 deficit target, Portugal
(‘EBA’) stress tests with mixed results reinforcing the
shall tighten budgetary execution, implement the
need to implement the programme reforms to strengthen
already approved one-time surcharge in the
the sector.
context of the personal income tax in 2011,
frontload from 2012 to 1 October 2011 the
increase in the VAT rate for natural gas and elec
(6) Notwithstanding
the
relatively
large
first
disbursement,
tricity and step up sales of concessions. The
the government’s cash position remains under strain.
government shall also endeavour to adopt other
This is explained by increasing financing needs from
consolidation measures of a permanent nature
SOEs, a sharp increase in households’ redemption of
and/or frontload other measures planned for
savings certificates, and persisting financial market stress.
2012. The ongoing process of a phased transfer
of banks pensions funds to the State social
security system shall exceptionally provide a
(7) Progress
in
labour
and
product
market
reforms
is
buffer towards reaching the 2011 fiscal deficit
essential to restore competitiveness and raise growth
target. The acquired assets of these pension funds
potential. In this respect, the special rights of the state
shall not be used in a way detrimental to long-term
in private companies were abolished ahead of schedule.
sustainability.
The privatisation programme is being accelerated and
broadened. A severe and urgent restructuring of SOEs
is at the top of the government’s agenda. Labour
market reforms to align the protection and rights
(b) Portugal shall adopt measures to reinforce public
under fixed and open-ended contracts and to establish
finance management. Portugal shall implement the
an employer-financed fund for paying out workers’
measures foreseen in the new Budgetary Framework
severance entitlements are advancing. Progress is being
Law, including setting-up a medium-term budgetary
made in preparation for a budget-neutral so-called fiscal
framework, prepare a medium-term fiscal strategy
devaluation, and authorities remain committed to take a
and establish an independent Fiscal Council. The
major first step in this area with the 2012 Budget.
budgetary framework at local and regional levels
Structural reforms should be implemented decisively
shall be considerably strengthened, in particular
and closely monitored.
by aligning the respective financing laws to the
requirements of the Budgetary Framework Law.
Portugal shall step up reporting and monitoring
(8) In
light
of
these
developments,
Implementing
Decision
of public finances, in particular arrears; it shall set
2011/344/EU should be amended,
up a strategy for the settlement of arrears, and
reinforce budgetary execution rules and procedures.
Portugal shall start the systematic and regular
HAS ADOPTED THIS DECISION:
analysis of fiscal risks as part of the budget
process, including the risks stemming from Public
Private Partnerships (“PPPs”) and SOEs.
Article 1
Implementing Decision 2011/344/EU is amended as follows:
(c) Portugal shall continue strengthening labour market
functioning, notably by taking measures to reform
(1) Article 1(3) is replaced by the following:
employment protection legislation, wage setting
and active labour market policies.’;
‘3. The
Union
financial
assistance
shall
be
made
available
by the Commission to Portugal in a maximum of 14
(b) point (e) is replaced by the following:
instalments. An instalment may be disbursed in one or
several tranches. The maturities of the tranches under the
first and second instalment may be longer than the
maximum average maturity referred to in paragraph 1. In
‘(e) Portugal shall continue opening up the economy to
such cases, the maturities of further tranches shall be set so
competition. The government shall take the
that the maximum average maturity referred to in paragraph
necessary measures to ensure that the Portuguese
1 be achieved once all instalments have been disbursed.’;
State or any public body do not conclude, in a
shareholder capacity, shareholder agreements
which may hinder the free movement of capital
(2) Article 3(5) is amended as follows:
or influence the management control of companies.
The new Privatisation Law shall also be respectful to
the principles of free movement of capital and not
(a) points (a), (b) and (c) are replaced by the following:
grant or allow special rights to the State. A revision

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L 240/10
EN
Official Journal of the European Union
16.9.2011
of competition law shall be undertaken aiming at
guaranteed bank bonds, which has been authorised
improving the speed and effectiveness of
up to EUR 35 billion in line with EU State aid rules;
enforcement of competition rules.’;
(b) Follow closely the plans presented by the banks to
(c) the following points are added:
reach a core Tier 1 ratio of 9 % by end-2011 and
10 % at the latest by end-2012. If the banks cannot
‘(g) Portugal shall adopt measures to improve the effi
reach the capital requirement thresholds on time,
ciency and sustainability of SOEs at central, regional
they might temporarily require public provision of
and local level. Portugal shall prepare a compre
equity for private banks through the established
hensive SOEs strategy document reviewing the
EUR 12 billion bank solvency support facility;
tariff structure and the service provision and a
plan to tighten borrowing requirements as of
2012. Portugal shall implement ongoing plans to
(c) Ensure a balanced an orderly deleveraging of the
reduce operational costs by at least 15 % on
banking sector, which remains critical to elim
average in central government SOEs outside the
inating funding imbalances on a permanent basis.
health sector and prepare an equivalent plan for
Banks’ funding plans target a reduction in the loan-
regional and local government SOEs.
to-deposit ratio to about 120 % and a reduction of
the reliance on Eurosystem funding during the
duration of the programme. The Bank of Portugal
(h) Portugal shall implement the privatisation
shall ask banks to revise their funding plans by end-
programme. In particular, public sector shares in
September. These funding plans shall be reviewed
EDP, REN and GALP, and, if market conditions
quarterly, starting from the second programme
permit, TAP, shall be sold in 2011. A strategic
review. The Bank of Portugal shall take appropriate
privatisation plan for Parpublica shall be prepared.
action in case of deviations from the banks’ funding
The privatisation plan through 2013 shall also
plans;’;
cover Aeroportos de Portugal, the freight branch
of CP, Correios de Portugal and Caixa Seguros, as
well as a number of smaller firms.’;
(b) point (e) is replaced by the following:
(3) in Article 3(6), points (a) and (b) are replaced by the
‘(e) Ensure that the state-owned Caixa Geral de
following:
Depósitos (CGD) is streamlined to increase the
capital base of its core banking arm as needed;
‘(a) The 2012 budget shall include a budget neutral recali
the necessary resources to increase the capital
bration of the tax system with a view to lowering
base should come from within the group.
labour costs and boosting competitiveness. The
Complete the sale of Banco Português de
reform shall be developed in consultation with the
Negócios after clearance from the Commission in
Commission, the ECB and the IMF.
accordance with competition and State aid rules;’.
(b) The measures, defined in points (c) and (d), amounting
Article 2
to at least EUR 5,1 billion, shall be included in the
2012 Budget. Further measures, mostly on the expen
This Decision is addressed to the Portuguese Republic.
diture side, shall be taken to fill any possible gap arising
from budgetary developments in 2011. The
government shall prepare an updated assessment of
Article 3
the budgetary situation and prospects in view of the
This Decision shall be published in the Official Journal of the
discussion of the 2012 Budget with the Commission,
European Union.
the ECB and the IMF before its approval by the
government.’;
(4) Article 3(8) is amended as follows:
Done at Brussels, 2 September 2011.
(a) points (a), (b) and (c) are replaced by the following:
For the Council
‘(a) Encourage banks to strengthen their collateral
The President
buffers and monitor the issuance of the government
M. DOWGIELEWICZ

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