Portugal Plans Major Labour Reforms to Attract Investment and Spur Growth
Government Pushes for Labour Law Changes to Enhance Economic Competitiveness
By Sergio Goncalves
Prime Minister Advocates for Labour Reform
LISBON, May 26 (Reuters) - Portugal must loosen labour laws to boost its competitiveness and attract more investment, Prime Minister Luis Montenegro said on Tuesday as he sought to drum up support for a proposed labour reform.
Key Measures in the Proposed Reform
Portugal's minority centre-right government hopes to secure parliamentary approval for a sweeping labour reform in the coming weeks, despite union opposition to key measures. These include easing outsourcing limits and introducing time-bank arrangements to handle demand peaks by allowing employees to accumulate hours that can be compensated with paid leave or a salary premium.
OECD Ranking and Economic Potential
Portugal has the 38th most rigid labour laws out of 39 countries in the OECD, limiting its ability to capitalise on sound public finances, tax cuts, innovation and its location far from war zones, Montenegro said at a business conference in the northern city of Braga.
"We do not want to take away workers' rights, but Portugal is an economy that, in this time of external instability, has everything it needs to be a benchmark for stability and for attracting more investment," Montenegro said.
Economic Impact of Labour Law Changes
Easing labour laws would allow Portugal to unlock economic growth of 3.5% to 4% a year by accelerating investment, Montenegro said. Current laws are holding it back, leaving the economy stuck on growth of 1.5% to 2% in recent years, he said.
Foreign Direct Investment Trends
Foreign direct investment in Portugal fell 34% to €8.5 billion ($9.9 billion) in 2025. That was mainly due to a €1.2 billion drop in intra-group debt between resident subsidiaries and their non-resident parent companies, according to the central bank.
Record Investment by State Agency
The state agency for attracting export-oriented investment, AICEP, secured a new record of €3.5 billion in investment last year, eight times more than in 2024.
Government's Stance and Next Steps
Montenegro said the government could fine tune its proposal but that a competitive economy cannot limit outsourcing or forgo time-bank arrangements.
($1 = 0.8594 euros)
(Reporting by Sergio Goncalves; editing by Charlie Devereux; Editing by Gus Trompiz)
