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27.4.2012 Official
Journal
of
the
European
Union L
115/21
DECISIONS
COUNCIL IMPLEMENTING DECISION
of 29 March 2012
amending Implementing Decision 2011/344/EU on granting Union financial assistance to Portugal
(2012/224/EU)
THE COUNCIL OF THE EUROPEAN UNION,
partners on a broad and ambitious labour market reform
and a significant revision of the competition legal
framework has been submitted to the Parliament which
Having regard to the Treaty on the Functioning of the European
will create conditions for an effective competition
Union,
enforcement regime. The privatisation programme is
being implemented under a new framework law. The
energy company EDP and the energy network company
REN have been sold. A strategy to restructure state-
Having regard to Council Regulation (EU) No 407/2010 of
owned enterprises (SOEs) has been put in place. The
11 May 2010 establishing a European financial stabilisation
legal framework for public procurement is being
mechanism ( 1 ), and in particular Article 3(2) thereof,
improved and the modernisation of the legal
framework for the housing market is underway. The
reform of the judicial system is making good progress.
Having regard to the proposal from the European Commission,
(3) In
the
light
of
these
developments,
Implementing
Whereas:
Decision 2011/344/EU should be amended,
(1) In
line
with
Article
3(9)
of
Council
Implementing HAS ADOPTED THIS DECISION:
Decision 2011/344/EU ( 2 ), the Commission, together
with the International Monetary Fund and in liaison
with the European Central Bank, has conducted the
Article 1
third review of the Portuguese authorities’ progress on
the implementation of the agreed measures under the
Article 3 of Implementing Decision 2011/344/EU is hereby
economic and financial adjustment programme (Pro
amended as follows:
gramme) as well as of their effectiveness and economic
and social impact.
(1) paragraph 6 is replaced by the following:
(2) The
review
has
found
that
Portugal’s
compliance
with
the
conditionality for the fourth quarter of 2011 was satis
factory. In 2011, the general government deficit fell
‘6. Portugal
shall
adopt
the
following
measures
during
below the target of 5,9 % of GDP and it is now
2012, in line with specifications in the Memorandum of
estimated at around 4 % of GDP, albeit by exceptionally
Understanding:
resorting to a transfer of about EUR 6 billion (about
3,5 % of GDP) of the banks’ pension funds to the State
social security system. The 2012 budget is consistent
(a) The measures defined in points (b) and (c), amounting
with meeting the deficit target of 4,5 % of GDP in line
to at least EUR 9,8 billion, shall be included in the
with the Programme. Policy efforts to support financial
2012 budget. Further measures, notably on the expen
system stability continue. Portuguese banks work towards
diture side, shall be taken to fill any possible gap
meeting the higher capital requirements as required by
arising from budgetary developments in 2012. The
the Programme, taking into account the implications of
government shall adopt a supplementary budget in
the European Banking Authority’s requirement for a new
March which will incorporate various elements such
temporary capital buffer for sovereign exposures, the
as the implications of the transfer of the banks’
special on-site inspection programme and the transfer
pension funds to the State social security system, the
of the banks’ pension funds to the State social security
financial agreement with the RAM, the fiscal impact of
system. Labour and product market reforms are also
the deterioration of the economic outlook, lower
progressing: an agreement was reached with social
interest payments and the strategy for the settlement
of arrears. The supplementary budget shall leave the
( 1 ) OJ L 118, 12.5.2010, p. 1.
target for the 2012 general government deficit (cor
( 2 ) OJ L 159, 17.6.2011, p. 88.
responding to 4,5 % of GDP) unchanged.

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L 115/22
EN
Official Journal of the European Union
27.4.2012
(b) Portugal shall aim to reduce expenditure in 2012 by at
(f) Portugal
shall
modernise
the
revenue
administration
by
least EUR 6,8 billion, including by reducing public
creating a single entity, reducing the number of
sector wages and employment; making cuts in
municipal offices and addressing remaining bottlenecks
pensions; carrying out a comprehensive reorganisation
in the tax appeal system.
of the central administration, eliminating redundancies
and other inefficiencies; reducing transfers to SOEs;
reorganising and reducing the number of municipalities
(g) Portugal shall implement the financial arrangement
and parishes; making cuts in education and health;
with the RAM.
lowering transfers to regional and local authorities;
and reducing capital expenditure and other expenditure
as set out in the Programme.
(h) Portugal shall adopt measures to improve the efficiency
and sustainability of SOEs at central, regional and local
level. Portugal shall implement a strategy to restructure
and reduce the indebtedness of SOEs and to ensure
(c) On the revenue side, Portugal shall implement revenue
improved conditions for market financing. Portugal
measures totalling around EUR 3 billion, including by
shall implement this strategy to reach operational
broadening VAT bases through reducing exemptions
balance at sector level by the end of 2012.
and rearranging the lists of goods and services subject
to reduced, intermediate and higher rates; increasing
excise taxes; broadening the corporate and personal
(i) Portugal
shall
continue
implementing
the
privatisation
income tax bases by reducing tax deductions and
programme. In particular, in 2012 the public sector
special regimes; ensuring the convergence of personal
shares in GALP, TAP and ANA shall be sold and the
income tax deductions applied to pensions and labour
privatisation of the freight branch of Comboios de
income; and changing property taxation by substan
Portugal, Correios de Portugal as well as a number of
tially reducing exemptions. These measures shall be
smaller firms shall be launched. A strategy for
complemented by action to fight tax evasion, fraud
Parpública shall be prepared, considering its winding
and informality.
down or consolidation with the general government.
(j) Portugal shall implement legislation to reform the
(d) Portugal shall adopt measures to reinforce public
unemployment insurance system, including by
finance management. It shall implement the measures
reducing the maximum duration of unemployment
provided for in the new Budgetary Framework Law,
insurance benefits; placing a cap on unemployment
including setting up a medium-term budgetary
benefits to 2,5 times the social support index;
framework. The budgetary framework at local and
reducing benefits over the period of unemployment;
regional levels shall be considerably strengthened, in
reducing the minimum contributory period; and
particular by putting forward the key options for the
extending unemployment insurance to certain
alignment of the respective financing laws to the
categories of self-employed.
requirements of the Budgetary Framework Law.
Portugal shall step up the reporting and monitoring
of public finances and reinforce budgetary execution
(k) The Portuguese Government shall prepare a proposal to
rules and procedures. The Portuguese Government
align the system for severance payments to reduce its
shall prepare a strategy for the validation and
level to the Union average of 8-12 days per year of
settlement of arrears. The strategy shall lay out the
work and create a compensation fund for severance
prioritisation criteria for paying creditors, as well as
payments;
governance arrangements to ensure a fair and trans
parent settling process across all sectors. Portugal
shall put in place a strengthened legal and institutional
framework for assessing fiscal risks prior to engaging in
(l) Regulations
on
overtime
pay
shall
be
eased
and
flexi
a PPP contract. Similarly, Portugal shall adopt a law to
bility of working time arrangements shall be increased.
regulate the creation and functioning of SOEs at
central, regional and local levels. Portugal shall not
engage in any new PPP contract or create an SOE
(m) Portugal shall promote wage developments consistent
until the reviews and the new legal structure are in
with the objectives of fostering job creation and
place.
improving firms’ competitiveness with a view to
correcting macroeconomic imbalances. Over the
Programme period, any increase in minimum wages
shall take place only if justified by economic and
labour market developments. Measures shall be taken
(e) Local government administration in Portugal has
to address weaknesses in the current wage bargaining
currently 308 municipalities and 4
259 parishes.
schemes, including legislation to redefine the criteria
Portugal shall develop a consolidation plan to reor
and modalities of the extension of collective
ganise and significantly reduce the number of such
agreements and to facilitate firm-level agreements.
entities. These changes shall come into effect by the
Until then, the application of extensions shall be
beginning of the next local election cycle.
suspended.

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EN
27.4.2012 Official
Journal
of
the
European
Union L
115/23
(n) Active labour market policies shall be strengthened
(u) Portugal shall adopt the revised public procurement
after a review of current practices and the estab
code, thereby contributing to a more competitive
lishment of an agreed action plan.
business environment and to more efficient public
spending.
(o) An action plan shall be prepared to improve the quality
(v) Portugal shall implement legislation on the housing
of secondary and vocational education and training.
rental market to further balance the obligations of
tenants and landlords, to increase incentives for reno
vation and to make the market more flexible and
dynamic.’;
(p) The functioning of the judicial system shall be
improved by implementing the measures proposed
under the Judicial Reform Map and by conducting an
(2) paragraph 8 is amended as follows:
audit of the backlog of cases in order to target
measures to eliminate the court backlog and foster
alternative dispute settlements.
(a) points (b) and (c) are replaced by the following:
‘(b) follow closely the plans presented by the banks to
(q) Portugal shall continue opening up its economy to
reach a Core Tier 1 ratio of 10 % at the latest by
competition. The Portuguese Government shall take
the end of 2012. The capital requirements stemming
the necessary measures to ensure that obstacles to
from valuing sovereign debt based on market prices
free movement of capital will not be created by their
according to the European Banking Authority shall
action and in particular that the Portuguese State or
be met in June 2012 together with the capital impli
any public body does not conclude, in a shareholder
cations from the special on-site inspections
capacity, agreements which may hinder the free
programme and the transfer of the banks’ pension
movement of capital or influence the management
funds to the State social security system. If banks
control of companies. Professional services shall be
cannot reach the capital requirement thresholds on
liberalised by improving the professional qualification
time, they might temporarily require public
framework and by eliminating restrictions on regulated
provision of capital, which for privately-owned
professions. In construction and real estate activities,
banks shall be available through the EUR
Portugal shall make the requirements for cross-border
12 billion bank solvency support facility established
providers less burdensome and review obstacles to the
under the Programme;
establishment of services providers.
(c) ensure a balanced and orderly deleveraging of the
banking sector, which remains critical to eliminating
funding imbalances on a permanent basis. Banks’
(r) The competition and regulatory framework shall be
funding plans aim at reducing the loan-to-deposit
improved. Portugal shall reinforce the independence
ratio to an indicative value of around 120 % by
and resources of the main national regulatory auth
the end of the Programme and potentially
orities; implement the Competition Law with a view
reducing reliance on Eurosystem funding for the
to improving the speed and effectiveness of
duration of the Programme. These funding plans
enforcement of competition rules; and make the
shall be reviewed quarterly;’;
specialised court for competition, regulation and super
vision operational.
(b) points (e) and (f) are replaced by the following:
(s) In the energy sector, Portugal shall take measures to
‘(e) ensure that the state-owned Caixa Geral de
facilitate market entry and promote the establishment
Depósitos (CGD) is streamlined to increase the
of the Iberian gas market and it shall take further steps
capital base of its core banking arm as needed.
towards the full transposition of the Third EU Energy
The sale of its insurance arm is expected to take
Package. Portugal shall take measures to review the
place in 2012 directly to a final buyer and to
support and compensation schemes for the production
contribute to meeting that year’s additional capital
of electricity. Portugal shall take measures to reduce
needs, while CGD will continue efforts to divest
excessive rents and eliminate the tariff debt by 2020,
itself of non-strategic assets. Insofar as these needs
focusing on compensation schemes for power guar
cannot be met from internal group sources by the
antee, special regime (renewables — excluding those
end of June 2012, CGD shall be provided with
granted under tender mechanisms — and cogener
government capital support from cash buffers
ation), and the ordinary regime (“CMECs” and “CAEs”).
outside the bank solvency support facility;
(f) ensure that the proceeds associated with the partial
(t) In other network industries, in particular transport,
transfer of the banks’ pension funds to the State
telecommunications and postal services, Portugal shall
social security system shall be used respecting State
adopt additional measures to promote competition and
aid rules of the Union. The Portuguese Government
flexibility.
shall carry out, under strict eligibility criteria, a credit

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L 115/24
EN
Official Journal of the European Union
27.4.2012
assignment of up to EUR 3 billion from the banks
(e) point (j) is deleted.
to the general government, while maintaining the
contractual obligations of the debtor;’;
Article 2
(c) point (g) is replaced by the following:
This Decision is addressed to the Portuguese Republic.
‘(g) develop and implement a more effective strategy
for the recovery of the distressed assets of special
purpose vehicles with a view to maximising returns
for the tax payer within a reasonable timeframe;’;
Done at Brussels, 29 March 2012.
(d) point (i) is replaced by the following:
‘(i) ensure that banks have incorporated the available
For the Council
results of the special on-site inspections programme
in the stress test exercise with a 6 % Core Tier 1
The President
threshold.’;
N. WAMMEN

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