Luxembourg, 09/10/2012 (Agence Europe) - Pleased with the progress being made in Portugal with the structural adjustment programme connected with the international bailout, the country's European lenders decided on Monday 8 October to release the next instalment of aid, €2.8 billion. The cash will come from the European Financial Stabilisation Mechanism (EFSM) managed by the European Commission and the European Financial Stability Fund (EFSF), the latter to the tune of €800 million. The director general of the International Monetary Fund, Christine Lagarde, said she would recommend that the IMF's board release a further instalment of €1.5 billion, taking the aid total to €4.3 billion.
In a statement, Eurogroup said it was convinced that the Portuguese government wanted to apply the structural and budget measures laid down in the Portuguese programme. Taking note of the country's economic situation, characterised by a worse-than-expected recession and therefore lower tax revenue, Eurogroup approved the postponement to 2014 of the target of reducing the public deficit to below the 3% GDP cut-off point. This decision was endorsed by the ECOFIN Council on Tuesday 9 October, which made changes to the excess deficit proceedings against the country.
“The 18-18 measure.” Eurozone ministers welcomed what they described as the determined action by the Portuguese government to replace the original social security transfer plan with alternative measures. A month ago, Pedro Passos Coelho's government decided to increase social security contributions for workers to 18% and to reduce employers' social security contributions to the same amount, 18% (see EUROPE 10685). This measure was welcomed by Eurogroup at its recent summit in Nicosia (see EUROPE 10690); but faced with a vast wave of discontent, the Portuguese government had to make a U-turn and replace the controversial social security measures with an increase in income tax (see EUROPE 10701). (MB/transl.fl)