{
  "title": "IMF Survey: IMF Outlines Joint Support Plan with EU for Portugal",
  "publication": "IMF News, May 6, 2011",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/soint050611a",
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  "summary": "The International Monetary Fund and the European Union have announced a joint financing package worth €78 billion for Portugal, aimed at reigniting growth and employment. The EU pledged a total of €52 billion.",
  "publishDate": "2011-05-06",
  "sections": [
    {
      "heading": "Joint financing package and objectives",
      "content": "- Joint financing package worth €78 billion (about $116 billion).\n- EU pledge: €52 billion.\n- IMF contribution: €26 billion, to be provided over three years under the Extended Fund Facility.\n- Main goals: restore competitiveness, reignite growth, and create employment.\n- Purpose: provide breathing space to establish a strong record of policy implementation before returning to the markets."
    },
    {
      "heading": "Macroeconomic context and outlook",
      "content": "- Portugal averaged 1 percent growth during the past ten years—the slowest in the euro area.\n- Problems: large fiscal deficit, high levels of debt, and persistent unemployment.\n- Recovery expectation: \"We think a recovery will get under way in the first half of 2013, provided the reforms are implemented as planned.\""
    },
    {
      "heading": "Fiscal strategy and targets",
      "content": "- Fiscal adjustment size: measures amounting to about 10 percent of GDP (including those in the 2011 budget).\n- Deficit path: from 9.1 percent of GDP in 2010 to 3 percent of GDP by 2013.\n- Pace: strong and frontloaded adjustment; undertaking such an adjustment in only three years is described as \"extremely ambitious by any standard.\"\n- Implementation: half of the necessary adjustment already incorporated into the approved 2011 budget; government has identified all measures needed to reach the 3 percent target.\n- Social protection in fiscal context:\n  - Low-income earners will be exempt from public sector wage cuts.\n  - Low-income pensioners will be exempt from a planned pension freeze.\n  - Enhanced means testing for all social transfers.\n  - Protection from a co-payment increase in healthcare for the poor.\n  - Reduced period needed to access unemployment insurance."
    },
    {
      "heading": "Structural reform and competitiveness measures",
      "content": "- Three-pronged strategy: tackle structural problems, strengthen fiscal policy, ensure financial sector stability.\n- Proposed labor cost measure: sharp reduction in social security contributions in the order of 3–4 percent of GDP (offset by other tax and expenditure adjustments).\n- Targeted nontradable sectors for increased competition: electricity, transportation, and telecommunications.\n- Instruments: regulatory reform and accelerated privatization to reduce excessive profits and increase competition.\n- Labor market reforms: address the \"dual contract\" problem by aligning protections for open-ended and fixed-term hires; increase training opportunities for low skilled workers."
    },
    {
      "heading": "Financial sector stability measures",
      "content": "- Assessment: Portuguese financial sector judged \"fundamentally sound\" but affected by government problems and reduced access to wholesale markets.\n- Capital adequacy goal: increase in capital adequacy ratios to 10 percent (already under way) to restore confidence and return banks to wholesale markets.\n- Backstops: fully funded backstop mechanisms for capital and liquidity support included in the program should some banks need help.\n- Stance: preference for market-based restructuring, with contingency support available."
    },
    {
      "heading": "Distributional choices and public sector measures",
      "content": "- Examples of difficult measures:\n  - 5 percent cut in public sector wages in 2011.\n  - Wages and pensions frozen until 2013.\n  - Civil service staff numbers reduced in both 2012 and 2013.\n  - Suspension of all new public-private partnerships and large infrastructure projects.\n  - Streamlining spending on state-owned enterprises, local and regional government, and defense.\n- Equity focus: measures aim to attack rent-seeking and privileges of the relatively few and well-off; design a fairer and more equitable tax system."
    },
    {
      "heading": "Job creation and social outcomes",
      "content": "- Priority: create new jobs, especially for the young; address high youth unemployment.\n- Mechanisms for job creation: competition-enhancing reforms, labor market flexibility, reducing disproportionate burdens on temporary workers.\n- Training: increased training opportunities for low skilled workers."
    },
    {
      "heading": "Political economy and program credibility",
      "content": "- Need for broad political support and ownership for successful implementation.\n- Encouraging signs: discussions with main opposition parties suggest broad consensus exists.\n- Justification for expected success: program described as comprehensive, multi-year, credible, frontloaded, economically and socially balanced, and backed by exceptional international support.\n\nInternational Monetary Fund.\n\n---\n\n\n References\n\n- https://www.imf.org/en/News/country-focus\n- PRESS CENTER\n- IMF Survey Interview\n- IMF Country Focus\n- Read the press release\n- Read the EU-IMF statement\n- Portugal fast facts\n- Interview\n- Outlook for Europe\n- IMF support helps spur growth\n- Extended Fund Facility\n- financing package\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/soint050611a"
    }
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    "Published: May 6, 2011",
    "Joint financing package worth €78 billion (about $116 billion).",
    "EU pledge: €52 billion.",
    "IMF contribution: €26 billion, to be provided over three years under the Extended Fund Facility.",
    "Main goals: restore competitiveness, reignite growth, and create employment.",
    "Purpose: provide breathing space to establish a strong record of policy implementation before returning to the markets.",
    "Portugal averaged 1 percent growth during the past ten years—the slowest in the euro area.",
    "Problems: large fiscal deficit, high levels of debt, and persistent unemployment.",
    "Recovery expectation: \"We think a recovery will get under way in the first half of 2013, provided the reforms are implemented as planned.\"",
    "Fiscal adjustment size: measures amounting to about 10 percent of GDP (including those in the 2011 budget).",
    "Deficit path: from 9.1 percent of GDP in 2010 to 3 percent of GDP by 2013.",
    "Pace: strong and frontloaded adjustment; undertaking such an adjustment in only three years is described as \"extremely ambitious by any standard.\"",
    "Implementation: half of the necessary adjustment already incorporated into the approved 2011 budget; government has identified all measures needed to reach the 3 percent target.",
    "Social protection in fiscal context:",
    "Three-pronged strategy: tackle structural problems, strengthen fiscal policy, ensure financial sector stability.",
    "Proposed labor cost measure: sharp reduction in social security contributions in the order of 3–4 percent of GDP (offset by other tax and expenditure adjustments).",
    "Targeted nontradable sectors for increased competition: electricity, transportation, and telecommunications.",
    "Instruments: regulatory reform and accelerated privatization to reduce excessive profits and increase competition.",
    "Labor market reforms: address the \"dual contract\" problem by aligning protections for open-ended and fixed-term hires; increase training opportunities for low skilled workers.",
    "Assessment: Portuguese financial sector judged \"fundamentally sound\" but affected by government problems and reduced access to wholesale markets.",
    "Capital adequacy goal: increase in capital adequacy ratios to 10 percent (already under way) to restore confidence and return banks to wholesale markets.",
    "Backstops: fully funded backstop mechanisms for capital and liquidity support included in the program should some banks need help.",
    "Stance: preference for market-based restructuring, with contingency support available.",
    "Examples of difficult measures:",
    "Equity focus: measures aim to attack rent-seeking and privileges of the relatively few and well-off; design a fairer and more equitable tax system.",
    "Priority: create new jobs, especially for the young; address high youth unemployment.",
    "Mechanisms for job creation: competition-enhancing reforms, labor market flexibility, reducing disproportionate burdens on temporary workers.",
    "Training: increased training opportunities for low skilled workers.",
    "Need for broad political support and ownership for successful implementation.",
    "Encouraging signs: discussions with main opposition parties suggest broad consensus exists.",
    "Justification for expected success: program described as comprehensive, multi-year, credible, frontloaded, economically and socially balanced, and backed by exceptional international support.",
    "[https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[IMF Survey Interview](https://www.imf.org/en/news/search)",
    "[IMF Country Focus](https://www.imf.org/en/news/country-focus)",
    "[Read the press release](https://www.imf.org/external/np/sec/pr/2011/pr11160.htm)",
    "[Read the EU-IMF statement](http://www.imf.org/external/np/sec/pr/2011/pr11162.htm)",
    "[Portugal fast facts](https://www.imf.org/external/np/exr/countryfacts/prt/index.htm)",
    "[Interview](https://www.imf.org/external/np/tr/2011/tr041411b.htm)",
    "[Outlook for Europe](https://www.imf.org/external/pubs/ft/survey/so/2011/CAR041711A.htm)",
    "[IMF support helps spur growth](https://www.imf.org/external/pubs/ft/survey/so/2011/NEW041511A.htm)",
    "[Extended Fund Facility](https://www.imf.org/external/np/exr/facts/eff.htm)",
    "[financing package](https://www.imf.org/external/np/sec/pr/2011/pr11162.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
  ],
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