X - Financial Support

A number of member states have received direct financial assistance through balance of payments support (Hungary, Rumania, Latvia), bilateral agreements/IMF (Greece), the temporary emergency funds/IMF (Ireland, Portugal, Greece), and the permanent emergency fund (Spain and Cyprus).       
Several member states have (also) indirectly benefited through the Securities Markets Programme (SMP) created in May 2010, a bond-buying programme of the European Central Bank that was replaced in September 2012 by the Outright Monetary Transactions (OMT) programme (Greece, Ireland, Portugal, Italy, Spain).  

If relevant, describe the political, economic and legal situation leading up to the moment of the formal request of direct financial assistance.

The event that triggered the request for international financial assistance was the rejection in parliament of what came to be known as “PEC IV” (SGP/BDS 2011-2014)[1] in March 2011. At the same time ECOFIN’s reform of SGP was up for debate in parliament too. The package included measures such as the freezing and cutting in pensions and the review and limitation of benefits and tax deductions on IRS and IRC.[2] These measures had been previously negotiated with Germany, the Commission and the ECB. [3] Later on, former Finance Minister Teixeira dos Santos affirmed that the approval of PEC-IV and SGP would have allowed the ECB to buy Portugal’s sovereign debt, helping it to finance itself and alleviating the pressure of the markets; it would have enabled Portugal to benefit of similar conditions that permitted Spain to avoid a bail-out of the economic sector.[4] Instead, its rejection left Prime Minister José Socrates without legitimacy or mandate to represent Portugal in ECOFIN’s meeting of 23 March – during which SGP ought to be approved. This conduced to his resignation; on the same day Portuguese debt interests rate went from 7% to 14%. In 16 April 2011 Portugal’s inability to finance itself led to the request for financial assistance.


Nevertheless, and regardless of the series of events that in early 2011 precipitated the request for financial assistance, already in early 2009, close to the end of term of José Socrates’ first government, Portugal’s overall economic performance was classified as “poor”. That year, the GDP was expected to contract by 3.5%, rising unemployment by 8.5%. Eurobarometer also showed that 92% of the Portuguese saw the economy as “bad” and 95% were depressed about their job situation. A decade of slow growth and the economic and financial crisis exposed Portugal’s frailties

To tackle the escalation of the deficit the government had put into practice a series of public reforms in the sectors of social security, public administration, health, amongst others. These reforms proved hard to impose and most of them did not go through. In attempt to increase competitiveness the government had also pushed for other measures already in 2006 such as the adoption of the “Technological Plan”,[5] “Simplex”,[6] and pushing for greater investment in renewable energies. On renewable energies, Portugal was described as “a model of how to stimulate the economy and fight climate change”. Portugal was expected to create 22.000 new jobs in 2020, by producing over 60% of its electricity.[7]

However, the elections, in late 2009, created a minority PS government (with only 36,55% of the votes). Lack of political consensus and popular support either froze or cancelled the reforms that had been planned or initiated. It must be highlighted that the minority government had little margin of manoeuvre to approve what were already identified as austerity measures aimed at avoiding that Portugal would become the third EU country under financial assistance. Opposition challenged measures presented by the Government to combat the financial crisis; the deficit continued rising and as the measures applied were mostly connected with an increase in taxes their approval was also accompanied of public discontentment.

On 11 March 2011, the Left Block (BE) presented a motion against the government. BE opposed any austerity measures, manifested concern over growing unemployment, potential recession and argued that elections were the “democratic answer” to the crisis.[8] With the support of centre-right wing party PPD-PSD the motion was approved.

A few days later it becomes clear that PEC IV, will be rejected. BE repeatedly accused the government of wanting the parliament to approve a package of measures that put Portugal closer to the “IMF recipe”, closer to Greece and Ireland.[9] MPs from PPD-PSD accused the government of presenting yet another “brutal package” of austerity measures and inquired that if after the first PEC came another and another when would it end.[10] Passos Coelho, at the time leader of PPD-PSD announced that PDS would not legitimise PEC IV.

On 23 March, the Parliament adopted five resolutions rejecting PEC IV, coming from PSD, CDS-PP, PCP, BE and Os Verdes. These resolutions blocked the approval of PEC IV and hence left the Government without a mandate to represent Portugal towards EU institutions. As a consequence the President announces that the Prime Minister has presented his resignation. In public declarations the Prime Minister states that “what happened today in Parliament has nothing to do with [him] or the Government but with the country – the country has lost”. The following day, Angela Merkel underlines that the PEC IV was about the “stability of the euro”, for which any government must be responsible, and regrets that the Portuguese parliament did not support the reforms proposed by Socrates’.[11]


In the end of March, the President announced anticipated parliamentary elections for June 5th.. Pressure for requesting financial aid increases amidst political turmoil: left wing parties state they will not legitimize the request for financial aid, which they consider a “threat” and “aggravation of circumstances”; Government stated that any request for external aid entailed the negotiation of conditions that exceed the powers of a caretaker government; PSD disputed the latter and stated its support for a request of financial aid – Pedro Passos Coelho ensured that, if he were to be elected prime minister, he would not hesitate to request external aid.


Portugal’s banks were threatening a “bond-buyers’ go-slow” unless the caretaker government sought financial help from other European Union countries.[12] On 6 April 2011 the ratings agency Moody’s lowered the ‘rating’ of the bonds of six Portuguese banks,[13] following the lowering of Portugal’s rating in three levels by Fitch.  The State put on the market 1,005 million euros in debt maturing in October 2011 and March 2012, the latter paying an interest rate 5.902%, 1.571 percentage points more than the last similar issue.[14] On the same day, José Sócrates announces he has addressed a request for financial assistance to the European Commission; the request was formalized on 7 April 2011.  


Describe the public and political debate during the negotiations on the financial assistance instruments, notably the Memorandum of Understanding (MoU) and Financial Assistance Facility Agreement, in particular in relation to the implications for (budgetary) sovereignty, constitutional law,
socio-economic fundamental rights, and the budgetary process.

The period during which the MoU was negotiated was politically complex: there was an outgoing government and no agreement even between opposition parties. International press labelled it an “undemocratic bailout”, advocating rather for the concession of a temporary bridge loan and for waiting for a new government, with full legitimacy to be elected.[15] Instead, the Memorandum was agreed within a ‘mixed’ team of experts pertaining to the former government and the opposition – there is, however, little information available on these debates. MoU was signed on 17th May 2011.


A slightly different version of the MoU had been signed on 3rd May 2011 between the Government and the main parties of the opposition (PPD/PSD and CDS/PP). As the government was outgoing this resulted from a demand of the EU and Eurogroup that claimed that negotiations should involve all parties calling for a broad spectrum of agreement among all political parties particularly on the measures of fiscal consolidation and structural reforms. Of course this demand, that took place before elections, can be interpreted as an intervention on national affairs.[16]


Following the elections that took place on 5 June, the newly elected prime-minister Pedro Passos Coelho (leader of PSD) vowed to be “more ambitious” than the MoU, outlining plans for social security, health and education reforms that would go beyond the rescue package.[17] Passos Coelho intended to forge a “social contract” between government, employers and unions, some say following a neo-liberal agenda rather than an economic recovery plan. Its programme for government was described as embracing all measures contained in PEC IV, the MoU and going much beyond[18] But he faced growing resistance from Unions, opposition and public in general.


The government’s plans for a “pragmatic constitutional revision” to ease reforms would have needed support from the Socialist opposition, which did not happen.

Prime-Minister Passos Coelho’s ambitions to go further than the established in the MoU were partly intended to demarcate Portugal from Greece.[19] But his election manifesto carried an element of liberal thinking that was new to the dominant political consensus, based on a strong welfare state.[20] He wanted to see the private sector run national health clinics, for example, and to allow companies to offer alternatives to publicly financed social security. Passos Coelho was often accused of using the IMF/EU bail-out as a pretext for putting forward the most conservative right-wing programme in Portugal since 1974.

In parliamentary debates the MoU is often – and early into the new government’s term – referred to as “pact of aggression” by opposition MPs.[21] Also as early as June 2011 left wing opposition accuses the PPD/PSD and CDS/PP coalition government – that had voted against PEC IV, and therefore overthrowing the previous government – of now putting forward what materially could be described as “PEC V” and “PEC VI” (see question X.1).[22] In mid-2012 parliamentary debates around the MoU already focused on the consequences of the MoU in Portuguese society.[23] PCP stated that the recession was deeper than before because Portugal now counted 1,2 million unemployed; and the salaries of those that remained employed were cut, as were holiday and Christmas subsidies, all accompanied by sequential tax increases. CDS-PP intervened to say that the situation was not derived from external financial aid, but a mere product of the previous years’ excessive fiscal weight of the State. It added that the Government was, however, taking measures to protect the poorer, by creating the Social Emergency programme (see question X.12). Counter-accusations included the potential destruction of middle class, replacing welfare state for charity and the deep recession.[24] Verdes (PEV) noted that, since the Troika’s intervention, the economy had receded 3,3% and that the results relating to GDP and deficit would not be attained. The PSD intervened stating that the MoU was being respected and successful, noting the legislative measures taken in the areas of Competition, Labour and Insolvency, the successful transposition of EU Directives, the reform of the law relating to local and regional financing and the privatizations of EDP and REN; it further underlined the enhancement of social protection and support to enterprises, as well as measures to combat unemployment.


Overall, parliament debates all through the present government’s term are strongly marked by exchange of accusations on whose responsibility is it for the signing of the MoU, over who negotiated the MoU and who has been responsible for the aggravation of its demands after each troika mission.


In the end of 2012 Prime Minister Pedro Passos Coelho initiated a campaign for the “refoundation” of the MoU and the “refoundation” of the (Welfare) State. This was as an attempt to again use the MoU to push for Constitutional amendment. In October 2013 a “Script for State Reform was approved in Council of Ministers”.[25] Despite efforts, it did not find any echo among opposition parties or popular support. All parties in opposition blocked the creation of a Parliamentary Commission for State Reform – blocking the reform itself – by refusing to indicate MPs to integrate it.[26]


Status instruments       
What is the status of the financial assistance instruments in the national legal order (political agreement, international treaty, etc.)?

On 5 May 2011, the Council of Ministers approved, through a resolution, both the Memorandum of Understanding on Specific Economic Policy Conditionality, negotiated with the EC in collaboration with the ECB,[27] and the Memorandum of Economic and Financial Policies negotiated with IMF[28]. In the same resolution the Council of Ministers delegated on the Ministry of Finance the competence to sign the Memorandums and any other instruments deemed necessary for the implementation of these instruments. The legal basis for the approval were articles 186º, n.º 5 and 199.º of the Constitution (Council of Ministers Resolution – nº8/2011, 17 May 2011).[29] Both documents were sent respectively to the EU and the IMF by letters signed by the Minister of Finance and the Governor of the Bank of Portugal. The letter to the IMF solicited for financial support from the Extended Fund Facility. Moreover, throughout public debate these two instruments are almost always referred to as one single Memorandum of Understanding (MoU). Their legal status in the national legal order is also not necessarily the same.

Their internal approval procedure would suggest their strict political nature but this is far from being unchallenged in the national legal order.[30] For starters, the Constitutional Court has considered them to be “legally binding acts”.[31] In addition, most scholars are inclined to support this view by classifying them as International Treaties. Yet others consider that the one with IMF consists of two unilateral acts and the one with the EU consists of some version of EU law, but both with merely political obligations.[32] In addition, there are those that consider that the instruments cannot be considered neither International Treaties nor unilateral acts but international contracts; these scholars also consider that this has been the interpretation of the Constitutional Court.[33] In reality, there is a plurality of views on the nature of the MoU.[34]

The Memorandum of Economic and Financial Policies negotiated with IMF can be considered “a sui generis agreement with both legal and political commitments more suitable to have been approved as an international treaty rather than a mere political agreement”, an international treaty between a State and an International Organization whose object is a loan, which is dependent of a fixed-term and a condition precedent [35] The international growing trend to consider it as a set of two unilateral acts was rejected by several scholars based on the assumption that both parties are legally bound to its execution, even if it contains political obligations. Among other considerations, neither Portugal could unilaterally decide not to pay back the loan nor could IMF unilaterally alter conditions under which the loan would be granted. Both actions would be a basis for exception of compliance.

Nevertheless, the parties (PT and IMF) do seem to have tried to keep it as a mere political agreement i.e. it was never signed by the IMF; And in addition, IMF defines it as an unilateral act of acceptance of the request and IMF also explicitly defines that contractual language is to be avoided in MoU.[36] The above mentioned scholars have labelled these efforts as “fictional”. Adding that the non-compliance of this agreement by one of the parties would always have legal consequences i.e. if conditions were not met IMF would not continue to transfer the loan and if IMF would stop transferring Portugal would stop pursuing the execution of the political commitments previously assumed. Oddly enough it seems to be exactly in the interested of flexibility that IMF has fostered its nature of unilateral act, so that deadlines and measures could be easily adapted to the ever changing conditions in bailed-out countries. In PT, an aggravating economical recession accompanied the implementation of the MoU. As previously mentioned this is a highly controversial issue and other scholars are more conservative and consider IMF’s financing to be what IMF says it is “the result of an unilateral decision by IMF”, the MoU working strictly as a sort of “loan guarantee”.[37]

Similar considerations have been subject of debate on the Memorandum of Understanding on Specific Economic Policy Conditionality, negotiated with the EC in collaboration with the ECB. The later is however less controversial as to its legal nature. First, it was also signed by the counterpart, in this case the EC. Second, it is easier to identify it as legally binding because its text invoques legally binding European Law, it uses language used by ECOFIN such as the elements of “strict conditionality” and makes systematic reference to the existence of an “agreement”.  In addition, because many of its provisions are budgetary they can be interpreted as deriving from the SGP and the excessive deficit procedure. The non-compliance with the later would of course result in the application of legal sanctions. [38]

 (see questions IV.6, X.1 and X.2)


Transposition national legal order       
Considering the status of the financial assistance instruments, what procedure does the constitution prescribe for their adoption/transposition into the national legal order?

At the national level, and as it was mentioned above, it has been subject of great discussion the terms in which the MoU was drafted and approved. Some scholars consider it to have been adequately approved by the government within its contractual and therefore administrative competences.[39] Many doubt the extent to which its approval respected the Constitution (see question X.3 and question X.8). A few describe its approval as a “clear proof of how reality’s brutality disrupted the law and Constitution”.[40]

A strict interpretation would prevent any Portuguese court from applying it or for it to have effects in the national legal order.[41] Notwithstanding, this would not per se be a basis for challenging it in international courts. There is an undeniable strong political commitment behind the approval of the MoU. For these reasons, it is widely accepted that in reality it does produce effects in national legal order.

The MoU was approved by a caretaker government within its residual administrative powers – article 186.º, n.º 5 and article 199º, g) of the Constitution. For the purpose of clarification, and if we accept that the MoU is a sui generis agreement between a State and an International organization, that includes political obligations of legal consequences (see question X.3), then it should have followed the regime of approval of international treaties. Even if we would abstract from the fact that it was a caretaker government approving it, the MoU could have only been approved within its political powers – articles 197.º, c) and j) as well as 200.º, n.º 1, f) of the Constitution. Notwithstanding, in the present case, as the obligations included in the MoU fall into Parliament competences, it should have been actually approved by the Parliament – as to validate special “general conditions” of the agreement – article 161.º, h).[42] Even if the parliament had been dissolved on 7 April, MPs mandate was still valid and the powers of the Parliament’s permanent commission remained intact – article 172.º n.º 3 of the Constitution.[43] It is therefore doubtful that it could have been merely approved by the Council of Ministers.

In perspective, and as a question to pose to those that do consider the MoU to have been appropriately approved by the government: how would it be justifiable that the SGP and various PECs require parliament approval but not an instrument that contains more grave consequences to the legal order such as the MoU (Ruling n.º 396/2011, 353/2012, 187/2013: see the Annex).[44]

In addition, it is arguable whether it should have been adopted as an International Treaty or in the form of International “Agreement”.[45] In the Portuguese national legal order there is a difference between International Treaty and International “Agreement”. This is irrelevant for International Public Law, as both are, for all possible purposes, an International Treaty.[46] This difference amounts only to who is competent for its approval at domestic level. While the treaty is ratified by the President of the Republic, the “Agreement” (in Portuguese “Acordo”) is signed by the President of the Republic (according to article 161, i) and 197, 1, c) of the Constitution.). After its approval in the Council of Ministers the MoU was only signed by the Minister of Finance (the latter under Law Decree n.º 321/2009, 11 of December).[47]


Role Parliament
What is the actual role of Parliament with regard to the adoption/transposition into the national legal order of the financial assistance instruments?

Parliament’s role is to legislate within the powers conferred by the Constitution in the terms described in articles 161.º to 170 of the Constitution. Therefore it discussed, approved/disapproved bills intended to implement the measures agreed in the MoU (i.e., every bill which transposes the measures in the MoU is discussed in the Parliament and therein approved or rejected).


In addition, in the scope of the parliamentary discussions and legislative work, inquiry commissions were created to accompany not only the application of the MoU per se, but also the implementation of some of the measures provided for in the instrument (i.e., the Parliament creates specialized inquiry commissions designed to make sure the MoU is duly implemented in general – that is, that the measures taken are effectively transposing the MoU – and also to accompany the implementation of these measures).


In reference to the latter, several parliamentary committees were created: inquiry committee to analyse the facts that led to the financial crisis; committee to accompany the financial assistance programme;[48] inquiry committee on the process of nationalization, management and sale of BPN bank (bailed-out bank); inquiry committee on public-private partnerships; inquiry committee on high-risk activities by public companies, committee on the reform of the Portuguese Central Bank amongst others.


As to role the Parliament should have assumed in the adoption of financial assistance instruments see question X.4.


Adjustment requirements
Describe the relevant content of the financial assistance instruments.

The Memorandum of Understanding was signed on 6 May 2011 by the European Commission, the International Monetary Fund and the European Central Bank and for Portugal by the Minister of Finance after having been approved by the Council of Ministers. It consists of a series of measures, amongst which the following can be counted:[49]

·      Numerous reductions, the first one being that of the deficit. The Government debt-to-GDP ratio is to be decreased as of 2013, with reductions of the deficit to 5.9% GDP in 2011, 4.5% GDP in 2012 and 3.0% GDP in 2013. These reductions will also reflect in the reorganisation of the local government municipalities and civil parishes, as well as in what refers to positions in the central administration. This should be accompanied by a decrease in the staff admissions for that same central administration, together with constraints in both wages and promotions, with mobility being encouraged.

·      In what concerns health benefits, systems such as ADSE, ADM and SAD (the so-called public employment schemes) will see their budgets constrained; the National healthcare system fees will be increased.

·      The pensions of the public sector which amount is above 1500€ will be reduced according to progressive rates and indexation rules are not to be applied.

·      Public enterprises, ie which owner is the State, will suffer a number of changes in order to decrease the operating costs and increase revenues. Their tariff structure is to be reviewed so as to reduce any subsidies.

·      The tax deductions in the corporate system, together with personal income tax benefits, will be reduced. Different caps will be applied to the existing categories. Cash social transfers will now be subject to individual taxes. As for the VAT revenues, they shall be raised, with a correspondent reduction of exemptions and modifications to the current categories.

·      As regards the banking system, Caixa Geral de Depósitos (CGD) will reduce the activities outside the country and focus on reduction of the subsidiaries and investments in the insurance arm of the group. Banco Português de Negócios (BPN) is to be sold.

·      ANA, TAP and the freight branch of CP, in transports, GALP, EDP and REN, in energy, and Caixa de Seguros, in insurance, will be subject to an accelerated privatisation process.

·      Golden shares and other special rights are to be eliminated.

·      Gas and electricity tariffs will be phased out by January 2013.

·      There shall be no increase in the minimum wage, unless justified by notable exceptions.

·      In what concerns the judicial system, new court management models are to be applied, amongst which an encouragement of settlement mechanisms.


What legal changes, if any, had to be made to accommodate ‘troika’ review missions, post-programme surveillance missions, etc?

The main structure created to accompany troika review missions was the ESAME (Estrutura para o Acompanhamento da Execução do Memorando de Entendimento). ESAME integrated the cabinet of the Deputy State Secretary to the Prime-Minister, its mission was to monitor, in conjunction with the Ministry of Finance, the full and timely compliance of the measures agreed at the signing of the MoU. It also enabled permanent communication and collaboration between the Government, the representatives of the European Union, International Monetary Fund and European Central Bank, on all matters relating to the technical implementation of the agreed measures.[50] ESAME was extinct in 30 June 2014.

All Troika missions were anticipated of great public uproar and programmatic discussions.

As to public demonstrations, protests were leaded both by short-lived anti-austerity organizations and unions and started as early as 2010/2011. On 12 March 2011, around 300.000 people demonstrated in Lisbon and 80.000 in Oporto. The demonstration was organized by “Geração à Rasca” (“Desperate Generation”), an organization similar to Spanish Indignados. The following month, the organizers of the Geração à Rasca demonstration created the platform M12M: Movimento 12 de Março (’12 March Movement’). The platform Que se Lixe a Troika (“Screw the Troika”) organized subsequent series of protests that lasted until late 2013, early 2014 most of them in anticipation of Troika mission. These type of organizations got a lot of media attention but – lacking clear ideology and long term goals –  their ability to mobilize declined.


Between 2011 and 2014 there has been a revival of icons of the 1974 revolution such as the song of “Grândola Vila Morena”, “FMI” (IMF) and “Vampiros”. Production of resistance music has peaked – such as “Parva que sou” of the band “Deolinda”, or the Eurovision satirical song “Homens da Luta”. [51] Contemporary artists have used the public space to create crisis-related artwork. As an example, a painting portraying Prime-Minister Passos Coelho and Vice-Prime Minister Paulo Portas as Angela’s Merkel puppets has become a symbol, not only making the headlines upon its creation but from then on many times accompanying crisis-related news. It has, as others, come to incorporate the visual memory of the crisis.[52]


In the parliament, troika and troika missions were mentioned in respect to the adoption of legislation. In addition, the parliamentary commission created for accompanying the implementation of the programme (CEAMPAFP) would meet before/after each troika evaluation. Government often met with social partners and unions[53] Lengthy discussions touched upon which measures were being adopted to comply with the MoU, the deficit, or the overall state-of-play regarding the budget.[54] 

Support for the present government declined. Public demonstrations of discontent were organised gathering thousands of people. Troika missions became associated with institutional democratic deficit, impoverishment of the population and the country’s long-term economical decline.

In general, public debates started focusing on how the successive changes of the programme (as a consequence of every troika mission) felt to be aimed at PT paying back the loan – at the cost -, and not towards boosting its economy. Tension within the government also grew as CDS-PP for more than once manifested publicly its availability to re-negotiate the MoU in terms less damaging for PT.

On the legal change see also the annexes about the case law.

Case law international instruments        
Have there been direct or indirect legal challenges against the financial assistance instruments before a national (constitutional) court?

There have been no direct challenges against the financial instruments. In its rulings 396/2011, 353/2012, 187/2013, 494/2013 and 602/2013 the Constitutional Court takes note of the MoU and acknowledges its “legally binding nature”. The Constitutional Court recognizes that the financial assistance programme establishes “firm commitments” for Portugal; that these commitments are “more binding than the SGP”; and that “Portugal should adopt a set of measures and legislative initiatives, including structural ones, in connection with public finance, financial stability and competitiveness, during 3 years” – Ruling n. º 396/2011[55]. As mentioned above, the Constitutional Court considers the MoU to be legally binding as their legal basis are international treaties – ruling n.º 396/2011, 353/2012, 187/2013, 494/2013, 602/2013.

The Constitutional Court did not, at any point in time, pronounce itself on the MoU constitutionality. Could the Constitutional Court have recognized its legally binding nature with pronouncing itself on its constitutionality? Some scholars have stated that it is a far too serious breach of the Constitution to have been ignored. Besides not having declared that the MoU would not have been applicable in the national legal order the Court has also been criticised for not pronouncing on the clear breach of rules of form and competence under which the MoU should have been approved (see questions X.3, X.4 and X.5). However, as it was a fait accompli – and as the MoU was binding in the international legal order – the same scholars consider that the Constitutional Court should acknowledge that too – without, nevertheless, disregarding the breaches to the Constitution by “the political system”.[56] Scholars that do not consider the MoU should have been approved as an International Treaty also do not consider the Constitutional Court had any reason to pronounce on its conformity with the Constitution.[57] 

All scholars, regardless of their views on the actual nature of the MoU are unanimous on the extent to which the executive, the political parties and the political system as a whole was, at the time, constrained by “the reality of the facts and the “control of the global financial capitalism system”.[58]

Please check also the annexes with the description of relevant case law of the Portuguese Constitutional Court.


Case law implementing measures      
Is there a (constitutional) court judgment on national policy measures adopted in relation to the Memoranda of Understanding?

For more information see the description of rulings n.º 396/2011, n.º 353/2012, n.º 187/2013, n.º 474/2013, n.º 602/2013, n.º 862/2013 and n.º 413/2014 in the annexes regarding case law.

Bond purchases ECB 
Describe the political, economic and legal situation leading up to the moment where the European Central Banks started buying government bonds on the secondary market (through the Securities Markets Programme, SMP).

The ECB bought bonds under the SMP during 2010 and 2011. Information about the level of ECB’s exposure is almost non-existent. In 2013, the ECB declared that in the Portuguese case it was up to 22800 million euros. [59]


In September 2012 it was announced that the ECB would buy bonds from the Portuguese Republic in the scope of OMT (outright monetary transactions); however, due to the fact that the Portuguese crisis was being held under the IMF/temporary emergency funds, the ECB made clear that such would be expected to happen only when the country regained access to the markets.


Portugal has in the meantime exited the financial assistance programme and OMT was so far never used by the ECB.


Conditionality bond purchases ECB      
What national policy measures have been requested by the ECB in exchange for the acquisition of government bonds on the secondary market? How have these requests been subject to debate in light of their implications for (budgetary) sovereignty, constitutional law and the budgetary process?

See question X.10.

What other information is relevant with regard to Portugal and financial support?

According to official data from the European Commission Portugal is now under post-Programme surveillance (PPS) until at least 75% of the financial assistance received has been repaid. PPS may last at least until 2026.[60]

[1] PEC is the acronym for the Stability Programme in Portuguese and it sets set of national measures to try to curb the crisis. In previous years PEC I, II and III had already been approved.

[2] “Behold PEC IV” by Pedro Carvalho, 10 December 2010, in Económico available at http://economico.sapo.pt/noticias/eis-o-pec-iv_106885.html

[3] For further details on the negotiation v. Interview with José Socrates in Revista Expresso, 19.10.2013, p.24ss

[4] Intervention of Finance Minister Teixeira dos Santos in Parliament available at http://www.tsf.pt/PaginaInicial/Economia/Interior.aspx?content_id=2989526.  See also “Teixeira dos Santos states proposals of the government for OE 2014 go too far”, 24 October 2013 available at http://www.jornaldenegocios.pt/economia/politica/detalhe/teixeira_dos_santos_diz_que_propostas_do_governo_para_o_oe2014_vao_longe_demais.html

[5] For more information on the “Technological Plan”, see http://www.cnel.gov.pt/en/technological-plan/about-the-plan/list.aspx.

[6] For more information on “Simplex” see http://www.simplex.pt/english.html and http://www.oecd.org/regreform/policyconference/46312938.pdf.

[7] “Socratic Method”, 1 July, 2009, available at http://www.economist.com/node/14560974.

[8] Parliamentary debate of 16 March 2011, available at http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l11sl2n64-0009&type=texto&q=moção%20de%20censura

[9] Parliamentary debate of 16 March 2011, at http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l11sl2n64-0009&type=texto&q=moção%20de%20censura

[10] Parliamentary debate 16 March 2011 http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l11sl2n64-0014&type=texto&q=moção%20de%20censura

[11] “Portugal’s Crisis Hijacks EU Summit” 23 March 2011, available at http://www.nytimes.com/video/business/100000000741912/crisis-o.html and   “The death of Socrates”, 23 March 2011, available at http://www.economist.com/blogs/newsbook/2011/03/portugals_government_collapses

[12]Banks 1 Portugal 0”, 6 April 2011, Financial Times, available at http://www.ft.com/intl/cms/s/0/a52a5c16-6085-11e0-9fcb-00144feab49a.html?siteedition=intl#axzz3FyPVxBOW.

[13] See Economia Expresso of 6th April 2011, http://expresso.sapo.pt/moodys-baixa-iratingi-de-7-bancos-portugueses=f642082

[14] Source: http://www.tsf.pt/PaginaInicial/Economia/Interior.aspx?content_id=1823753&page=1

[15] http://www.nytimes.com/2011/04/15/opinion/15fri2.html?module=Search&mabReward=relbias%3Ar%2C%7B%221%22%3A%22RI%3A5%22%7D

[16] Francisco Pereira Coutinho, “A natureza jurídica dos memorandos da “troika”” in Themis, ano XIII, n.ºs 24/25, 165..

[17] A grim inheritance, 9 June 2009, The Economist at http://www.economist.com/node/18805349, “Politicians battle over Portuguese bail-out”, 16 May 2011, Financial Times.

[18] Parliamentary debate 19 May, 2011, http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l11sl2n75-0012&type=texto&q=memorando%20de%20entendimento&sm=p

[19] As an example on why the PM considered that it was necessary to go “beyond” the MoU, parliamentary debate 30 June 2011, available at http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l12sl1n3-0027&type=texto&q=memorando%20de%20entendimento&sm=p.

[20] Parliamentary debate 1 July 2011 on which the “restructuring of the State” in the scope of the MoU is discussed http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l12sl1n3-0012&type=texto&q=memorando%20de%20entendimento&sm=p. “A grim inheritance”, 9 June 2011 available at http://www.economist.com/node/18805349.

[21] Parliamentary debate 20 October 2011. http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l12sl1n34-0036&type=texto&q=memorando%20de%20entendimento&sm=p

[22] Parliamentary debate 30 June 2011, http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l12sl1n3-0027&type=texto&q=memorando%20de%20entendimento&sm=p

[23] Report of Parliament intervention of March 21st, 2012 – http://www.parlamento.pt/ActividadeParlamentar/Paginas/DetalheActividadeParlamentar.aspx?BID=92411&ACT_TP=ITG

[24] As examples of interventions in Parliament in which the government was accused of replacing rights with charity see debate of 30 June 2011, http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l12sl1n3-0055&type=texto&q=caridade&sm=p and debate of 14 February 2014 http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l12sl2n54-0005&type=texto&q=caridade&sm=p.

[25] Document entitled “A Better State” http://www.portugal.gov.pt/media/1228115/20131030%20guiao%20reforma%20estado.pdf

[26] Merely as an example see parliamentary debate 30 January 2013, during which CDS/PP MP insists that restructuring of the Welfare State results from the MoU, available at http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l12sl2n47-0006&type=texto&q=memorando%20de%20entendimento&sm=p. In June 2014 a parliamentary debate during which the government insists on the “State reform” and alluding to the refusal of the opposition to integrate a Comission to discuss it  http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l12sl3n93-0031&type=texto&q=reforma%20do%20estado&sm=p.

[27] http://ec.europa.eu/economy_finance/eu_borrower/mou/2011-05-18-mou-portugal_en.pdf

[28] http://imf.org/external/np/loi/2011/prt/051711.pdf

[29] https://dre.pt/application/dir/pdf2sdip/2011/05/095000000/2116421164.pdf

[30] Eduardo Correia Baptista in “Natureza Jurídica dos memorandos de FMI e a UE”, Revista da Ordem dos Advogados, 71, 2, 2011, p. 480.

[31] Acordão do Tribunal Constitucional n.º 353/2012, de 5 de Junho.

[32] Francisco Pereira Coutinho, “A natureza jurídica dos memorandos da “troika”” in Themis, ano XIII, n.ºs 24/25, 147-179.

[33] Francisco Pereira Coutinho in “A natureza jurídica dos memorandos da Troika”, Themis, 24/25, pag. 147 ss. Carlos Blanco de Morais in “Curso de Direito Constitucional, Teoria da Constituição em Tempo de Crise do Estado Social” Coimbra Editora, 2014, 724-726.

[34] For an overview of the plurality of views on the MoU see “O Memorando da Troika em análise”, da Revista de Finanças Públicas e Direito Fiscal, 4, 2, 2011, pp. 15-70 and “Troika Ano II. Uma avaliaçãoo de 66 cidadãos”, Edições 70, 2013, coordinated by Eduardo Paz Ferreira.

[35] Eduardo Correia Baptista in “Natureza Jurídica dos memorandos de FMI e a UE”, Revista da Ordem dos Advogados, 71, 2, 2011, pág. 483. Of the same opinion Filipa Lemos Caldas and Tomás Arantes e Oliveira, “A vinculatividade do Memorando de Entendimento da Troika”, Revista de Direito Público e Finanças, 4, 4, 2011, pp. 173-176, André Moz Caldas, “A desinteressantíssima Trindade ou a Troika revisitada”, Eduardo Paz Ferreira (coord.), “Troika Ano II. Uma avaliação de 66 cidadãos”, Edições 70, 2013, pp. 88 e 89, and Nuno Cunha Rodrigues, “O memorando da Troka em análise – aprecisção geral”, Revista de Finanças Públicas e Direito Fiscal, 4, 2, 2011, p. 16, que considera ser discutível se o memorando configura “um acordo internacional ou um contrato de direito privado”.

[36] Guidance etc, ECB calls it “fictional” due to intensive negotiations that translate into a contract to which both parties are bound.

[37] Francisco Pereira Coutinho, “A natureza jurídica dos memorandos da troika”, p. 161.

[38] Eduardo Correia Baptista, pp. 489. Similarly, Francisco Pereira Coutinho called it “a non-typified act of European Union Law” pp. 167. However, the later also concludes that both MoU are not legally binding instruments, adding that whether they are or not legally binding is “irrelevante” vis-à-vis the social, political and economical consequences if PT would not comply with their terms; the regular functioning of state institutions depends on the loan transfers what transforms the country, for all practical purposes, into a “international protectorate”.

[39] Such as Carlos Blanco de Morais in “Curso de Direito Constitucional, Teoria da Constituição em Tempo de Crise do Estado Social” Coimbra Editora, 2014, 724-726.

[40] José de Melo Alexandrino in “Jurisprudência da Crise. Das questões prévias às perplexidades” in “O Tribunal Constitucional e a Crise, ensaios críticos, Almedina, 2014, pp. 53.

[41] ECB does not consider it to fulfill article 8/2 of the Constitution; it would not produce effects in the national legal order.

[42] Eduardo Correia Baptista in “Natureza Jurídica dos memorandos de FMI e a UE”, Revista da Ordem dos Advogados, 71, 2, 2011, pág. 485 and José de Melo Alexandrino in “Jurisprudência da Crise. Das questões prévias às perplexidades” in “O Tribunal Constitucional e a Crise, ensaios críticos, Almedina, 2014, pp. 54.

[43] José de Melo Alexandrino in “Jurisprudência da Crise. Das questões prévias às perplexidades” in “O Tribunal Constitucional e a Crise, ensaios críticos, Almedina, 2014, pp. 55.

[44] José de Melo Alexandrino in “Jurisprudência da Crise. Das questões prévias às perplexidades” in “O Tribunal Constitucional e a Crise, ensaios críticos, Almedina, 2014, pp. 55.

[45] Eduardo Correia Baptista in “Natureza Jurídica dos memorandos de FMI e a UE”, Revista da Ordem dos Advogados, 71, 2, 2011, pág. 485.

[46] Overall, Determining whether the government or the parliament are competent to bind Portugal to International Treaties, as well as if whether the appropriate form is Treaty or “Agreement” depends of the combined analysis of articles 161.º, 164.º, 197.º, 198.º and  200.º  of the Constitution. 

[47] Eduardo Correia Baptista in “Natureza Jurídica dos memorandos de FMI e a UE”, Revista da Ordem dos Advogados, 71, 2, 2011, pág. 485.

[48] http://www.parlamento.pt/sites/com/XIILeg/CEAMPAFP/Paginas/default.aspx

[49] These measures result from a reading and free translation of the measures contained in the explanations to the MoU, in its Portuguese version.

[50] Resolução de Conselho de Ministros n.º 112/2011, 11 Julho 2011, defined its mission and composition. For more information see http://www.portugal.gov.pt/pt/os-ministerios/primeiro-ministro/secretarios-de-estado/secretario-de-estado-adjunto-do-primeiro-ministro/sobre-o-secretario-de-estado-adjunto-do-primeiro-ministro.aspx

[51] European Parliament MP Rui Tavares on Deolinda’s song in Blitz, 4 February 2011, available at http://blitz.sapo.pt/ainda-os-deolinda-depois-da-geracao-rasca-a-geracao-parva=f70478 . “Deolinda, the band that gives voice to Geração à rasca” in Diário de Notícias, 12 March 2011, available at http://www.dn.pt/inicio/portugal/interior.aspx?content_id=1804652. On the song “Luta is Alegria” by “Homens da Luta” in Blitz, 11 March 2011, http://blitz.sapo.pt/jel-responde-a-miguel-sousa-tavares-os-homens-da-luta-sao-muito-mais-que-demagogicos=f71591. See “Old songs return to the streets” in Público, 10 April 2011, available at http://www.publico.pt/sup-publica/jornal/as-velhas-cancoes-voltaram-a-rua-21740426

[52] Diário de Notícias, 24 October 2012, available at http://www.dn.pt/inicio/portugal/interior.aspx?content_id=2844550Jornal de Notícias, 26 October 2012, available at http://www.jn.pt/PaginaInicial/Politica/Interior.aspx?content_id=2849539

[53] For more information on the CEAMPAFP (2011-07-06 a 2014-09-25) and reports of its meetings see http://www.parlamento.pt/sites/com/XIILeg/CEAMPAFP/Paginas/default.aspx. Diário de Notícias, 11 July 2011, available at http://www.dn.pt/inicio/portugal/interior.aspx?content_id=1903989.

[54] Merely as an example see Jornal i, 11 September 2013, available at http://www.ionline.pt/artigos/dinheiro/programa-cautelar-segundo-resgate-sao-factos-antagonicos.

[55] José de Melo Alexandrino in “Jurisprudência da Crise. Das questões prévias às perplexidades” in “O Tribunal Constitucional e a Crise, ensaios críticos, Almedina, 2014, pp. 51-68.

[56] José de Melo Alexandrino in “Jurisprudência da Crise. Das questões prévias às perplexidades” in “O Tribunal Constitucional e a Crise, ensaios críticos, Almedina, 2014, pp. 51-68.

[57] Carlos Blanco de Morais in “Curso de Direito Constitucional, Teoria da Constituição em Tempo de Crise do Estado Social” Coimbra Editora, 2014, 724.

[58] José de Melo Alexandrino in “Jurisprudência da Crise. Das questões prévias às perplexidades” in “O Tribunal Constitucional e a Crise, ensaios críticos, Almedina, 2014, pp. 51-68. Constitutional Court Ruling n.º 65/2002 and the circumstances of “necessity” and “urgency” vis-à-vis “financial rupture” legitimize its approval by a caretaker government, in this sense Carlos Blanco de Morais in “Curso de Direito Constitucional, Teoria da Constituição em Tempo de Crise do Estado Social” Coimbra Editora, 2014, 725.

[59] In Jornal de Negócios, 28 February 2014 available at http://www.jornaldenegocios.pt/mercados/detalhe/bancos_voltam_a_apostar_na_divida_nacional_apos_fotografia_do_bce.html

[60] For more information see http://ec.europa.eu/economy_finance/assistance_eu_ms/portugal/index_en.htm