Council recommended that Portugal should implement the measures as laid down in Council Decision and further specified in the Memorandum of Understanding of 17 May 2011 and its subsequent supplements.
In 2010, Portugal's GDP grew at a rate of 1.3 per cent. This positive growth rate was, however, largely due to exceptional factors that boosted exports and private consumption. Price and cost developments clearly indicated that Portugal was not boosting competitiveness at a sufficiently fast rate to redress its current account deficit, which was high at 10 per cent of GDP in 2010. The weak overall economy and the steep increase in unemployment (11.2 per cent at the end of 2010), spilled into large government deficits, which exceeded 10 per cent of GDP in 2009 and 9 per cent in 2010, up from 3.5 per cent in 2008. As a result, Portugal has recently come under increasing pressure in financial markets, raising concerns about the sustainability of its public finances. Following consecutive downgradings of Portuguese bonds by credit rating agencies, the country became unable to refinance itself at rates compatible with long-term fiscal sustainability. In parallel, the banking sector, which is heavily dependent on external financing, particularly within the euro area, was increasingly cut off from market funding.
Portugal committed to implementing the economic and financial adjustment programme with the aim of restoring confidence in its sovereign debt and in the banking sector and supporting growth and employment. It provides for comprehensive action on three fronts: (i) a credible and balanced fiscal consolidation strategy, supported by structural fiscal measures and better fiscal control; (ii) deep and frontloaded structural reforms in the labour and product markets; and (iii) efforts to safeguard the financial sector against disorderly deleveraging through market-based mechanisms supported by back-up facilities.
The Commission has assessed the National Reform Programme2. It has taken into account not only its relevance for sustainable fiscal and socio-economic policy in Portugal but also its conformity with EU rules and guidance, given the need to strengthen the overall economic governance of the European Union by providing EU level input into future national decisions. In this context, the Commission stresses the urgency of implementing the planned measures to comply with Council Decision 2011/0122.
© European Council
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