This report by European Commission services assesses compliance with the terms and conditions of the First Review under the Economic Adjustment Programme.

The programme aims at restoring competitiveness and to put Portugal’s economy back on the path of sustainable growth, sound public finances and job creation.

This report assesses compliance with the terms and conditions for the 1st Review of the Economic Adjustment Programme and summarises the findings of the joint EC/IMF and ECB mission. It also incorporates in an annex the updated programme documents, endorsed by the Council on 2 September 2011 and by the IMF Executive Board on 12 September 2011.

The new government that took office on 21 June has taken full ownership of the programme. It has quickly moved to meet the structural targets for the First Review and reacted promptly to evidence of an emerging shortfall in public finances. Structural reforms to open the economy to competition and reduce government involvement in the private sector are underway. Measures to strengthen the financial sector are underway. In particular, banks are working towards meeting the higher capital requirements established under the programme. Growth prospects remain subdued with an expected GDP loss of about 2% of GDP this year and the next, before recovery takes hold in 2013.