The European Commission said today that the Portugal’s plan to allow banks to work together with common debtors is an "important initiative" which will accelerate the recovery of viable companies.
"The restructuring of viable businesses should be accelerated while non-viable companies should not continue to weigh on bank balance sheets. The platform to strengthen the coordination of bad debt management is an important initiative in this regard," says the European Commission.
In the report of the 6th post-programme mission to Portugal released today, Brussels says that the recovery of the banking sector is underway, supported by an acceleration in economic activity.
"However, on average, industry continues to be pressured by low profitability, weak capital reserves and poor credit ratios, although these are improving," the report said, adding that "it remains essential that banks strengthen their financial soundness as well as their internal governance.
Banco Comercial Português (BCP), Caixa Geral de Depósitos (CGD) and Novo Banco signed a memorandum of understanding at the end of September to create a bad credit platform that will allow them greater coordination in order to speed up corporate restructuring processes.
The European Commission warned that despite the two-for-one rule, the number of civil servants has actually increased in Portugal.
Recalling the return to the 35 hours of work for the Civil Service and the reversal of salary cuts for civil servants (since October last year), the Commission stated that the wage bill increased by 2.8% in 2016, significantly above last year's budget.
The EC reported that overall, Portugal had made "significant progress" over the past year, but that "the challenge is to keep pace," calling for ambitious reforms and sustained fiscal consolidation for the coming years.
"Portugal's economic and financial situation has improved and important progress has been made in resolving short-term risks since December 2016. Overall, Portugal's economic adjustment based on the adjustment programme has been commendable," read the report.