Financial assistance in Portugal

SUMMARY OF:

Implementing Decision 2011/344/EU – EU financial assistance to Portugal

WHAT IS THE AIM OF THE DECISION?

It approved the economic adjustment programme for Portugal. This included a 3-year financial package of loans up to €78 billion from a number of donors, including the European Union (EU).

KEY POINTS

On 17 May 2011, the EU agreed that Portugal required €78 billion in financial assistance between 2011 and mid-2014. The funding was to be provided in a maximum of 14 instalments by:
- the EU – €26 billion through the European Financial Stabilisation Mechanism and €26 billion through the European Financial Stability Facility;
- the International Monetary Fund (IMF) – around €26 billion.
During the programme, the European Financial Stabilisation Mechanism provided €24.3 billion, the European Financial Stabilisation Facility €26 billion and the IMF €26.5 billion.
The financial agreement set out in the economic adjustment programme for Portugal required the government to implement:
- structural reforms to boost potential growth, create jobs and improve competitiveness;
- a credible and balanced fiscal consolidation strategy with better control over public–private partnerships and state-owned enterprises to reduce the country’s deficit to 3% of the gross domestic product by 2013;
- a financial sector strategy based on recapitalisation* and deleveraging*.
In June 2014, the assistance programme came to an end.
Portugal is now subject to the EU’s post-programme surveillance. Under this, the European Commission, liaising with the European Central Bank:
- carries out regular visits to the country to assess its economic, fiscal and financial health;
- prepares half-yearly reports to monitor progress and determine whether further measures are needed.
The surveillance will continue until Portugal has repaid at least 75% of the loans that it received. The post-programme surveillance will last until 2026.

FROM WHEN DOES THE DECISION APPLY?

It has applied since 24 May 2011.

BACKGROUND

On 11 May 2010, the EU agreed to create a European financial stabilisation mechanism – the European Financial Stability Mechanism (Regulation (EU) No 407/2010). This enables the Commission to borrow on financial markets and to lend the proceeds on to a beneficiary country requiring financial support.
Portugal, after being downgraded by credit rating agencies and unable to raise financing at sustainable rates, requested help from the EU and the IMF on 7 April 2011.
The mechanism has also been used to help Ireland and Greece.
For further information, see:
- The economic adjustment programme for Portugal (European Commission)
- Financial assistance to Portugal (European Commission).

KEY TERMS

Recapitalisation. Restructuring a company’s debt and equity, with the aim of making its capital structure more stable.

Deleveraging. Reducing the level of debt by selling off assets.

MAIN DOCUMENT

Council Implementing Decision 2011/344/EU of 30 May 2011 on granting Union financial assistance to Portugal (OJ L 159, 17.6.2011, pp. 88–92).

Successive amendments to Implementing Decision 2011/344/EU have been incorporated into the original text. This consolidated version is of documentary value only.