L 192/12 Official Journal of the European Union 20.7.2012 COUNCIL IMPLEMENTING DECISION of 10 July 2012 amending Implementing Decision 2011/344/EU on granting Union financial assistance to Portugal (2012/409/EU) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, Having regard to Council Regulation (EU) No 407/2010 of 11 May 2010 establishing a European financial stabilisation mechanism (), and in particular Article 3(2) thereof, Having regard to the proposal from the European Commission, Whereas: (1) (") ¢ O] 0] In line with Article 3(9) of Council Implementing Decision 2011/344[EU (%), the Commission, together with the International Monetary Fund (IMF) and in liaison with the European Central Bank (ECB), has conducted the fourth review of the Portuguese auth- orities’ progress on the implementation of the agreed measures under the economic and financial adjustment programme (Programme) as well as of their effectiveness and economic and social impact. The review has found that Portugal’s compliance with the conditionality for the first quarter of 2012 was satis- factory. In 2011, the general government deficit was 4,2% of GDP. The fiscal target for 2012 of 4,5% of GDP remains within reach. The rebalancing of the economy has continued at a swift pace and exports have outperformed expectations and more than offset weaker domestic demand. However, risks to the fiscal objectives related to the rebalancing of the macro- economic outlook have started to materialise, with the growth composition tilting more strongly towards net exports and away from domestic demand and in view of the substantial worsening of the labour market situ- ation. Progress has been made with reforms to raise the long-term growth potential of the economy. Reform of the labour market aimed at removing rigidities and improving productivity has already been legislated for and need to be sustained. Severance payments should be aligned with the Union average and a fund to finance part of severance payments should be created. A proposal to revise the mechanism for extending collective agreements is under preparation. Policy efforts to support financial system stability continue. The sale of Banco Portugués de Negécios (BPN) has been concluded and the management of the special purpose vehicles should be optimised to maximise the recovery of the assets transferred from BPN. The deleveraging of the financial sector is evolving in an orderly fashion. The recapitalisation of the banking L 118, 12.5.2010, p. 1. L 159, 17.6.2011, p. 88. system is on target to ensure by June 2012 a minimum Core Tier 1 capital ratio of 9 %, including the European Banking Authority requirements and the capital needs related to the partial transfer of pension funds and special on-site inspections. The early intervention, resolution and deposit insurance framework has been strengthened and the Portuguese authorities are asked to prepare the implementing measures. Product market reforms, in particular in sheltered services, are essential to restore competitiveness and promote growth and employment. The Portuguese government is imple- menting a strategy to restructure state-owned enterprises (SOEs) to reduce their indebtedness and to insure improved conditions for market financing. A study to assess the costs and benefits of renegotiating any public-private  partnerships  (PPPs) or  concession contracts to reduce the government financial obligations is being prepared by an international auditing firm. The Portuguese government is committed to ensuring an effective competition enforcement regime. Housing market regulations are being modernised with a view to promoting geographical mobility and the reform of the judicial system is making good progress. The privati- sation programme is being implemented under the new framework law. ) In the light of these developments, Implementing Decision 2011/344/EU should be amended, HAS ADOPTED THIS DECISION: Article 1 Article 3 of Implementing Decision 2011/344/EU is hereby amended as follows: (1) paragraph 6 is amended as follows: (a) point (a) is replaced by the following: ‘(a) The general government deficit shall not exceed 4,5% of GDP in 2012. Portugal shall continue to closely monitor fiscal developments and assess whether further policy adjustments are necessary to achieve the 2012 target;; (b) points (d), (¢) and (f) are replaced by the following: ‘(d) Portugal shall continue adopting measures to reinforce public finance management. Portugal shall implement the measures provided for in the new Budgetary Framework Law, including setting up a medium-term budgetary framework. The local and regional budgetary frameworks shall be considerably  strengthened, in particular by aligning the respective financing laws with the requirements of the Budgetary Framework Law. Portugal shall step up the reporting and monitoring