Brussels piles pressure on government over PSU (single social benefit)

Portugal has just two months to complete one of its most politically sensitive welfare reforms, or risk losing €620 million in European Union recovery funding.

The European Commission has made it clear that all legislation for the new PSU, Single Social Benefit, must be in force by 31 August.

The warning piles fresh pressure on the government, which still has to settle several fundamental aspects of the reform – including the value of the new benefit, and the rules governing who will qualify.

According to Jornal de Negócios, the Commission told Lisbon that the legislation creating the Prestação Social Única (PSU) must be published in Portugal’s official gazette by the end of August if the reform is to satisfy the milestones attached to the country’s Recovery and Resilience Facility funding programme.

The overhaul is linked to a €620 million payment under the PRR (Plan for Recovery and Resilience). Failure to meet the agreed timetable will put that funding at risk.

But the reality is that ministers have very little time to finalise a package that is designed to bring 13 separate ‘non-contributory social benefits’ into a single payment. Among the list are widow’s/ widower’s pensions (60% of the deceased spouse’s pension, which is linked very much to contributions), and these all vary wildly – so to come up with one single figure is fraught with issues.

Brussels’ warning also contrasts with a recent decision by parliament to extend the government’s ‘legislative authorisation’ from 90 to 120 days following negotiations between the governing PSD-CDS coalition and the opposition Socialist Party (PS).

This  extension applies to the government’s power to legislate – but it does not alter the deadline agreed with Brussels.

Essentially, the reform remains unfinished, with politically sensitive issues still unresolved. Beyond the reference value of the new benefit, there is the question of eligibility criteria and several operational rules that will determine how the unified system works in practice.

Labour Minister Rosário Palma Ramalho has previously said the new scheme is expected to take practical effect from January 2027, reflecting the need for a transitional implementation period.

However, the European Commission declined to clarify whether this is even possible. It said only that compliance will be assessed once the final legal text is in force, and Portugal submits the necessary evidence with its payment request.

Lisbon is expected to submit that request by the end of September. If approved, the €620 million would be released before the end of the year.

The PSU reform has generated intense political debate since its introduction. The PS agreed to support the legislative authorisation only after securing safeguards that the new system would not be “globally less favourable” than the existing one, and that the benefit’s reference value would be established by decree-law rather than ministerial order, allowing greater parliamentary scrutiny.

Other contentious proposals—including a citizen reporting mechanism and changes to the way household members are assessed—were dropped during negotiations.

Despite the political agreement, one of the reform’s central elements remains undecided: the amount beneficiaries will actually receive.

But as reports today conclude, the European Commission’s message leaves little room for any further delay. With several core provisions still unresolved, the government (whether trying to take summer holidays or not) must now complete one of Portugal’s largest welfare reforms in just two months if it is to unlock hundreds of millions of euros in recovery funds that will otherwise vanish forever.

Source material: Jornal de Negócios/ Executive Digest