Article 1 · Decision 2014/234

Contents

Article 1 #

Implementing Decision 2011/344/EU is hereby amended as follows:

(1)in Article 1, paragraph 2 is replaced by the following:‘2.The financial assistance shall be made available during three years and six weeks, starting from the first day after the entry into force of this Decision.’;

(2)in Article 3, paragraphs 8 and 9 are replaced by the following:‘8.Portugal shall adopt the following measures during 2014, in line with specifications in the Memorandum of Understanding:

(a)the general government deficit shall not exceed 4 % of GDP in 2014 and the accumulation of new arrears shall be halted. For the calculation of the deficit target, the possible budgetary costs of bank support measures in the context of the Government's financial sector strategy shall not be taken into account. To achieve this objective, Portugal shall deliver consolidation measures worth 2,3 % of GDP as defined in the 2014 Budget Law and in supporting legislation adopted with this aim;

(a)ensure that banks' capital buffers remain adequate and follow the new capital requirements rules as laid down in Directive 2013/36/EU of the European Parliament and of the Council^note;

(aa)Portugal shall adopt measures enhancing the functioning of the transport system; the Strategic Plan for Transport for 2011-15 shall be fully implemented, including long-term actions which ensure efficiency and sustainability;

(b)to control for potential expenditure slippages, the Government shall closely monitor the respect of the ministerial expenditure ceilings through monthly reporting to the Council of Ministers;

(b)advise their banks to strengthen their collateral buffers on a sustainable basis;

(bb)Portugal shall continue to implement the transposition of the EU Railway Packages;

(c)Portugal shall swiftly define and implement the envisaged changes in the survivors' pensions eligibility conditions as well as draft the framework law regulating the conditions for the sale of online gambling licences by end-March. In addition, Portugal shall take decisive steps to implement the agreed sale of some port concessions;

(c)remain committed to providing further support to the banking system, if needed, encouraging banks to seek private solutions while resources from the Bank Solvency Support Facility are available in line with the Union's State aid rules to further support viable banks, subject to strict conditionality;

(cc)Portugal shall continue improving the governance system for ports, its economic regulation and operation;

(d)the comprehensive reform of the corporate income tax shall be implemented within the existing budgetary envelope to respect the fiscal consolidation targets;

(d)ensure a balanced and orderly deleveraging of the banking sector, which is critical in permanently eliminating funding imbalances and reducing the reliance on Eurosystem funding in the medium term. Banks funding and capital plans shall be reviewed quarterly;

(dd)Portugal shall continue to eliminate barriers to entry, soften existing authorisation requirements and reduce administrative burden in the services sector;

(e)the standstill rule for tax expenditures at central, regional or local level shall be maintained. Efforts to fight tax evasion and fraud for various types of taxes shall be further strengthened, inter alia, by the monitoring of the e-invoicing system. A study on the shadow economy in the housing market shall be carried out by the twelfth review with a view to seeking ways to reduce rental tax evasion;

(e)continue to strengthen the supervisory organisation of the Banco de Portugal, optimise its supervisory processes and develop and implement new supervisory methodologies and tools. The Banco de Portugal shall revise the standards on non-performing loans in order to achieve convergence with the criteria included in the relevant European Banking Authority technical standard in line with the timeframe set at Union level;

(ee)Portugal shall complete the adoption of the construction laws and the other outstanding sectorial amendments necessary to fully implement Directive 2006/123/EC and submit them to the Parliament where necessary;

(f)should adverse legal or other budgetary execution risks materialise, Portugal shall implement compensatory measures of high quality in order to meet the deficit target;

(f)continue to monitor on a quarterly basis the banks' potential capital needs with a forward looking approach under stress conditions including through the integration of the new top-down stress testing framework into the quality assurance process, which allows for a review of the key drivers of the results;

(ff)the Government shall submit to the Parliament the professional bodies' amended statutes;

(g)the Government shall specify the measures necessary to achieve the fiscal deficit target of no more than 2,5 % of GDP in 2015. The detailed plans shall be reflected in the 2014 Fiscal Strategy Document to be published by end-April 2014, which shall also specify detailed expenditure ceilings by line ministries. In order to comply with the Union budgetary framework requirements, that document shall also provide details of the medium-term budgetary plans;

(g)continue to closely monitor the implementation of the measures agreed in the restructuring plans of banks having received public capital support;

(gg)Portugal shall improve the business environment by completing pending reforms on the reduction of administrative burden, in particular making the Point of Single Contact fully operational to ensure conformity with Directive 2006/123/EC and with Directive 2005/36/EC of the European Parliament and of the Council^note and by carrying out further simplification of existing licensing procedures, regulations and other administrative burdens in the economy which are a major obstacle to the development of economic activities;

(h)the 2015 consolidation strategy shall be underpinned, among others, by the following measures:

(i)the Government shall develop a single wage scale during 2014 with a view to implementing it in 2015 and aimed at the rationalisation and consistency of remuneration policy across all careers of the public sector;

(ii)the single wage-supplements' scale, expected to be implemented in 2014, shall have its full fiscal impact in 2015;

(iii)new comprehensive measures as part of the ongoing pension reform shall be undertaken, aimed at improving the long-term sustainability of the pension system. The recently appointed pension reform committee shall develop specific details of the reform. The reform shall include short-term measures further linking pension entitlements to demographic and economic criteria while also respecting progressivity principles, in line with the Constitutional Court ruling on the convergence of the public-sector employees' pension system (CGA) to the general pension system. The specific design of this reform shall be presented by the time of the twelfth review with a draft law to be submitted to Parliament in the first half of the year. Further steps ensuring the long-term sustainability of the pension systems shall be specified. In addition, the Government shall ensure that the recently increased retirement age effectively apply to CGA pensioners during 2014; and

(iv)other measures to reach the 2,5 % of GDP target shall be defined before mid-April;

(h)ensure timely disposal of the subsidiaries and the assets in all three State-owned special purpose vehicles, including through the two selected service providers;

(hh)following the adoption of the amendments to Law 6/2006 on new urban leases and the decree law which simplifies the administrative procedure for renovations, Portugal shall undertake a comprehensive review of the functioning of the housing market;

(i)the medium-term fiscal strategy shall build on further reforms which are, inter alia, outlined in the proposal for the reform of the State. These reforms shall aim at improving the efficiency of the public sector and the quality of its services. Building on the first round of consultations with social partners, the progress of this agenda shall be discussed at the twelfth review;

(i)analyse banks' recovery plans and issue guidelines to the system on recovery plans in line with the relevant European Banking Authority technical standards and the relevant Union legislation on the recovery and resolution of credit institutions, and prepare resolution plans on the basis of the reports submitted by the banks;

(ii)the Government shall approve the corresponding amendments to the by-laws of the national regulatory authorities and shall ensure the effective functioning of the Competition Authority financing model;

(j)Portugal shall publish a tax expenditure report as part of the 2014 Budget covering central, regional and local administrations;

(j)prepare quarterly reports on the implementation of the new restructuring tools; continue to monitor the implementation of the framework for financial institutions to engage in out-of-court debt restructuring for households and smoothen the application of the framework for restructuring of corporate debt. Prepare, in consultation with the Banco de Portugal, a strategic plan aiming at addressing the corporate debt overhang and supporting the capital reallocation towards the productive sectors of the economy, while promoting financial stability;

(jj)Portugal shall assess the impact of the optional VAT cash accounting regime;

(k)Portugal shall set up an accounting function in the Ministry of Finance to improve the public sector accounting and reporting framework by end-June 2014. As part of its tasks, it shall ensure an adequate accounting for revenues, expenses, assets and liabilities related to government bank accounts, debt, and PPPs;

(k)continue the monitoring of the high indebtedness of the corporate and household sectors through quarterly reports and of the implementation of the new debt restructuring framework to ensure that it is working as effectively as possible;

(kk)Portugal shall continue implementing the comprehensive programme to tackle excessive licensing procedures, regulations and other administrative burdens in the economy.

(l)the Commitment Control Law shall be fully enforced in all public entities to prevent the creation of new arrears;

(l)encourage, on the basis of the proposals already made, the diversification of financing alternatives to the corporate sector, develop and implement solutions that provide financing alternatives to traditional bank credit for the corporate sector through an array of measures aiming to improve their access to the capital markets;

(m)Portugal shall take additional measures to further strengthen its public financial management system. Portugal shall review the Budget Framework Law to fully transpose the relevant Union legislation by end-March. In addition, Portugal shall carry out a more comprehensive revision of the Budget Framework Law to reduce budgetary fragmentation by limiting the number of budget entities and reviewing the classification of own revenues; to streamline the budget appropriation structure; to strengthen accountability; and to further anchor public finances in a medium-term framework. The key aspects and the structure of the new law shall be developed by end-April 2014. Portugal shall ensure that the measures to implement the new budgetary framework at central government level shall also be applied at regional and local levels;

(m)continue to evaluate the impact of the improvements in the government-guaranteed credit instruments on actual interest rates; stand ready to pursue policy alternatives, if deemed necessary, in order to ensure that government-guaranteed loans will be priced in a competitive and transparent manner in favour of end-users; regularly report on progress;

(n)Portugal shall fully implement the new legal and institutional PPPs framework. Renegotiations of PPPs shall proceed in various sectors in order to contain their budgetary impact. Annual reporting on PPPs shall provide a comprehensive assessment of the fiscal risks stemming from PPPs and concessions in time for the fiscal risks assessment of the budget. Following the new SOEs Framework Law and in line with the Ministry of Finance's enhanced shareholder role, a Technical Unit for the monitoring of SOEs shall be further staffed. The Government shall continue its comprehensive restructuring programme of SOEs with a view to maintaining and strengthening a sustainable operational balance. The Government shall continue with the privatisations already in the pipeline;

(n)establish a development financial institution (DFI) aiming at streamlining and centralising the implementation of the financial instruments supported by the European structural and investment funds for the 2014-20 programming period. The DFI shall not accept deposits or other repayable funds from the public, engage in direct lending, or invest in government debt or grant loans to the Government. The DFI's draft business model and by-laws shall be designed to avoid any additional burden on or risks to public finances.

(o)Portugal shall continue the reform agenda towards a modern and more efficient revenue administration in line with international best practises. Portugal shall announce by March-2014 the list of 50 % of local tax offices to be closed by May 2014. The number of resources devoted to auditing in the tax administration shall increase by at least 30 % of the total staff by the twelfth review. A new Taxpayer Services Department, unifying various services for taxpayers, shall be created within the tax administration. The Risk Management Unit shall be fully operational in the first quarter of 2014, focusing initially on targeted projects to improve compliance of self-employed professionals and high net wealth individuals. The tax compliance situation shall be continuously monitored. The anti-money laundering legal and regulatory framework shall be strengthened to tackle more effectively money laundering and its predicate crimes, including tax crimes;

(p)Portugal shall present a report with the following objectives:

(i)identifying overlaps of services and jurisdictions and other sources of inefficiencies between the central and the local levels of government; and

(ii)reorganising the network of decentralised services of ministries mainly through the Lojas do Cidadão (administration and utilities single points of contact) network and other approaches, encompassing more efficient geographical areas and intensifying the use of shared services and digital government;

(q)Portugal shall continue to implement a strategy of shared services in public administration, in particular on human resources management and on information and communication technologies;

(r)Portugal shall continue implementing reforms to the management of human resources in the public administration. Based on a survey and a report on wage supplements, draft legislation for a single wage-supplements' scale shall be presented by the twelfth review with a view to its implementation by June 2014. The new general Public Administration Labour Law, simplifying and compiling the existing rules of public sector employment along the structure of the private Labour Code, shall be approved in Parliament by March-2014;

(s)Portugal shall ensure efficiency and effectiveness in the healthcare system by continuing with the rational use of services and the control of expenditures including public spending on pharmaceuticals and hospital care, and eliminating arrears;

(t)Portugal shall continue the ongoing reorganisation and rationalisation of the hospital network through specialisation, concentration and redistribution of hospital services, and ensure the implementation of the multiyear action plan for hospital reorganisation;

(u)Portugal shall carry out reforms to tackle the high levels of segmentation in the labour market;

(v)Portugal shall promote wage developments which are consistent with the objectives of fostering job creation and 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;

(w)Portugal shall continue to ensure the effectiveness of its active labour market policies in line with the results of the assessment report and the action plan to improve the functioning of the public employment services;

(x)Portugal shall continue to implement the measures set out in its action plans to improve the quality of secondary and vocational education and training and increase the business involvement in the vocational and education training system;

(y)Portugal shall implement a plan to create an independent gas and electricity logistics operator company;

(z)Portugal shall implement adequate measures to eliminate the energy tariff debt and to ensure the sustainability of the national electricity system;

9.With a view to restoring confidence in the financial sector, Portugal shall aim to maintain an adequate level of capital in its banking sector and ensure an orderly deleveraging process in compliance with the deadlines set in the Memorandum of Understanding. In that regard, Portugal shall implement the strategy for the Portuguese banking sector agreed with the Commission, the ECB and the IMF so that financial stability is preserved. In particular, Portugal shall:

Decision 2014/234

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