The position is made clear in a letter signed by Portugal’s Minister of Finance, Maria Luís Albuquerque, to Pierre Mos-covici, the European commissioner for Economic and Financial Affairs, that refers to the commission’s report on the first mission by the ‘troika’ of institutions overseeing Portugal’s Eurozone bailout to monitor its performance after it officially exited the bailout last summer.
In it, Albuquerque states that “the Portuguese government disagrees with the characterisation [in the report] of developments in the labour market and in regulations covering the urban rental market as a retreat.”
The government last year tabled legislation to increase the national minimum salary (SMN) to €505 a month from €485, where it had been stuck for several years.
According to the letter, “in the course of contacts with international institutions, the government always expressed the intention, once the Economic and Financial Assistance Programme had ended, to agree with [unions and employers] the link between the updating of the SMN and the increase in productivity.”
The agreement to raise the SMN allows for this link, the minister’s letter states, as well as for a temporary cut of 0.75 percentage points in employers’ social security contributions for employees on the SMN.
In addition, the document states that there was a “range of measures” enacted by the government as a result of its negotiations with unions and employers, and that this “was discussed with the European Commission prior to its presentation” to those partners.
In its report on the first post-bailout assessment, which was made public on 22 December, the commission had warned that the pace of economic reforms in Portugal had slowed considerably since the official bailout exit and said that some gains had actually been reversed. One example was measures relating to collective employment contracts, which the commission doubted would contribute to bringing salaries more into line with productivity.
It also cited the increase in the SMN as possibly making it more difficult for “more vulnerable” workers to find employment.
On the urban rental market, the letter stresses that the government does not share the commission’s view that recent amendments risked undermining earlier reforms. Instead, she wrote, the law “limits itself to introducing slight adjustments... to correct negative aspects detected in the interim assessment of the law’s application”, including “the balance of obligations and rights of the parties, the protection of situations of vulnerability and the promotion of economic activity and employment in the face of the increase in the number of bankruptcies in 2012 and 2013 in the retail sector.”
In the letter, Albuquerque reiterates the right-of-centre coalition government’s “firm commitment” to ensuring that Portugal in 2015 decreases its public sector budget deficit to below 3 percent of gross domestic product.
The government had agreed a goal of 2.5 percent for this year but the 2015 state budget ended up projecting 2.7 percent, while the commission forecasts 3.3 percent.