Decision 2017/985 - Council Decision 2017/985 giving notice to Portugal to take measures for the deficit reduction judged necessary in order to remedy the situation of excessive deficit - Main contents

EN

Official Journal of the European Union

L 148/42

According to Article 126 of the Treaty on the Functioning of the European Union (TFEU), Member States are to avoid excessive government deficits.

The Stability and Growth Pact is based on the objective of sound government finances as a means of strengthening the conditions for price stability and for strong sustainable growth conducive to employment creation. The Stability and Growth Pact includes Council Regulation (EC) No 1467/97 (1), which was adopted in order to further the prompt correction of excessive general government deficits.

On 2 December 2009, the Council decided, in accordance with Article 126(6) TFEU, that an excessive deficit existed in Portugal and issued a recommendation to correct it by 2013 at the latest, in accordance with Article 126(7) TFEU and Article 3 of Regulation (EC) No 1467/97. Following the request by the Portuguese authorities for financial assistance from the Union, the Member States whose currency is the euro and the International Monetary Fund (IMF), the Council granted financial assistance to Portugal (2). The Memorandum of Understanding on Specific Economic Policy Conditionality (the ‘Memorandum of Understanding’) between the Commission and the Portuguese authorities was signed on 17 May 2011. Since then, the Council has addressed two new recommendations to Portugal (on 9 October 2012 and 21 June 2013) on the basis of Article 126(7) TFEU, which extended the deadline for correcting the excessive deficit to 2014 and 2015 respectively. In both recommendations, the Council considered that Portugal had taken effective action, but unexpected adverse economic events with major unfavourable consequences for government finances had occurred. (3)

According to Article 126(8) TFEU, the Council decided on 12 July 2016 that Portugal had not taken effective action in response to the Council Recommendation of 21 June 2013.

If actual data pursuant to Regulation (EC) No 479/2009 indicate that an excessive deficit has not been corrected by a participating Member State within the time-limits specified in a recommendation issued under Article 126(7) TFEU, the Council should immediately take a decision under Article 126(9) TFEU.

The Commission 2016 spring forecast projects a moderate recovery of the Portuguese economy. In 2016, real GDP is projected to grow by 1,5 %, at the same pace as in 2015, mainly driven by domestic demand amid still high macroeconomic imbalances. Private consumption is expected to lose momentum in 2016 due to higher indirect taxes and a slight recovery in energy price inflation. The strong rebound in the consumption of durable goods in the first half of 2015 is not forecast to be maintained over the medium term as still high unemployment and debt levels are projected to keep upward pressures on household savings. Business investment already decelerated significantly over the second half of 2015 and is not expected to resume its previous growth rate soon, despite a relatively high capacity utilisation rate. Total investment is anticipated to gain some pace in 2017, supported by EU structural funds and the improvement in financing conditions. Exports are forecast to grow in line with foreign demand, but imports are still expected to outbalance exports. As a result, the contribution of net trade to GDP growth is forecast...