(Reuters) - Following are terms of Portugal’s international bailout under a deal reached with the European Union and the International Monetary Fund in May.
* Portugal to receive 78 billion euros in loans, including up to 12 billion euros for the banking sector. It started receiving the funds in late May.
* The loans, with an average maturity of 7.5 years, will be disbursed through 2013 when, in the second half of the year, Portugal is expected to return to the bond market.
* The EU estimated in May that the interest rate Portugal was likely to pay on the loans would be between 5.5 percent and 6 percent.
* Portugal to cut this year’s budget deficit to 5.9 percent of gross domestic product from last year’s 9.2 percent.
* Cut further to 4.5 percent in 2012 and 3 percent in 2013.
* Portuguese economy is expected to shrink 2 percent this year, with a similar contraction forecast for next year.
- Tax increases and other revenues:
* List of goods with lower Value Added Tax rate to be revised this year, yielding extra revenue of over 410 million euros per year.
* Recurrent property tax to increase with reassessment of property values in 2011 and rate increases in 2012, to compensate for reduction in property transfer tax; this will yield over 250 million euros in 2012 and over 150 million euros in 2013.
* Freeze all existing tax benefits and incentives and cut some. Cap on health, education and housing allowances on personal income tax, to yield at least 150 million euros in 2012 and 175 million euros in 2013.
* Eliminate exemptions, reduced rates on corporate tax, to yield at least 150 million euros in 2012 and 150 million in 2013.
* Fees for health services to rise, indexed to inflation.
- Spending cuts:
* Improve the working of the central administration by eliminating waste and duplication, increasing efficiency, reducing services that are not a cost-effective use of public money (from 2012, annual savings of at least 500 million euros).
* Reduce costs in education, rationalizing school networks (saving 195 million euros in 2012, 175 million euros in 2013).
* Public sector wages, pensions to be frozen through 2013.
* Special contribution levy on pensions over 1,500 euros per month, to be introduced in 2012, yielding savings of at least 445 million euros.
* Reduce number of civil servants by 1 percent in both 2012 and 2013 by not replacing all retirees.
* Suspension of new public-private partnerships and large infrastructure projects.
* Streamline spending on Defense, state-owned companies and local government. Zero new spending for the military.
* Reduce overall operating costs of state-owned companies to save over 515 million euros in 2012, 175 million euros in 2013; tighter debt ceilings from 2012.
* Cut management positions and administration units in regional government and related companies by 15 percent.
* Reduce transfers to local and regional authorities by at least 175 million euros per year.
* Reduce costs in other public bodies and entities by at least 110 million euros in 2012.
* Reduce costs in health sector, with savings worth 550 million euros in 2012, 375 million in 2013.
* Raise over 5.5 billion euros through 2013 including sale of stakes in oil company Galp, utility EDP, electricity grid operator REN, airline TAP, airport authority ANA, CGD bank’s insurance arm and freight branch of railway company CP. The government has said it will start EDP and REN sell-offs in the third quarter of this year.
* Failed bank BPN to be sold off with no minimum price set, with target to find buyer by end-July 2011.
* Two additional large companies to be identified for privatization by end-2012.
* Portuguese banks can use up to 12 billion euros from the bailout amount to help meet stricter capital requirements.
* Raise banks’ core Tier 1 capital ratio requirement to 9 percent by end-2011 from current 8 percent requirement for the end of the year, and then to 10 percent by end-2012.
* To maintain liquidity in sector, subject to approval under EU competition rules, the authorities commit to facilitate the issuance of government-guaranteed bank bonds of up to 35 billion euros, including the existing package of support measures.
- Labor market reforms:
* Cutting redundancy payments from 30 days’ wages per year worked to 10 days on new contracts by September 2011, later extending rule to all existing contracts.
* Reduce maximum period of unemployment benefit to 18 months from three years.
* Reduce scope for collective bargaining, hiring, layoffs.
- Justice system reforms:
* Resolve backlog of cases in courts within 24 months, audit backlog of economy-related cases.
* Restructure court system to improve management efficiency.
* Create competition, intellectual property rights courts.