Financial assistance to Portugal

The adjustment programme for Portugal

On 7 April 2011, Portugal requested financial assistance from the EU, euro area countries and the IMF. An economic adjustment programme was negotiated between the Portuguese authorities and officials from the European Commission, ECB and the IMF.

The agreement on the programme was formally adopted on 17 May 2011 at the Eurogroup/ECOFIN meeting in Brussels. The memorandum of understanding and the loan agreement were signed afterwards. It covered the period 2011 to mid-2014 and included a joint financing package of €78 billion, €26 billion of which was provided by the EU/EFSM, €26 billion by the EFSF and about €26 billion provided by the IMF.

The programme contained reforms to promote growth and jobs, fiscal measures to reduce the public debt and deficit, and measures to ensure the stability of the country’s financial sector.

Objectives

The aid was provided on the basis of a three-year policy programme for the period 2011 to mid-2014.
The economic adjustment programme included:

• structural reforms to boost potential growth, create jobs, and improve competitiveness
• a fiscal consolidation strategy, supported by fiscal-structural measures and better fiscal control over public-private-partnerships and state-owned enterprises, aimed at putting the gross public debt-to-GDP ratio on a firm downward path in the medium term and reducing the deficit below 3 % of GDP by 2014
• a financial sector strategy based on recapitalisation and deleveraging, with efforts to safeguard the financial sector against disorderly deleveraging through market based mechanisms supported by backstop facilities.

Financial package

The total of up to €78 billion of the financial package was financed as follows:

• EFSM (€24.3 billion disbursed by the end of 2014)
• EFSF (€26 billion disbursed by the end of 2014)
• IMF (€26.5 billion disbursed by the end of 2014)

Programme disbursements were foreseen over three years, under the EFSM with an average maximum maturity of 19.5 years. IMF disbursements were subject to the special drawing rights (SDR) rate developments.

Overview of disbursements

 The Portuguese government decided to end the programme without disbursement of the full amount of the assistance (in the end €24.3 billion of €26 billion was requested). This decision was publicly announced by the government on 12 June 2014. The concluding EFSM disbursement took place on 12 November 2014.

* The original maturity of 5 years of the EFSM loan of €4.75 billion raised on 25 May 2011 and disbursed on 1 June 2011 to Portugal was extended in three tranches, in line with Council Implementing Decision 2013/323/EU.

Complementary disbursements were made by the EFSF and the IMF.

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