Portugal calls for labour reform to boost economic growth

14:45

The government of Portugal is seeking major changes to labour regulations in an effort to strengthen economic growth and attract more foreign investment. Prime Minister Luís Montenegro said the country must modernize its labour framework to become more competitive in a rapidly changing global economy.

Speaking during a business conference in the city of Braga, Montenegro argued that Portugal has several economic advantages, including stable public finances, tax incentives, innovation potential and geographical distance from international conflict zones. However, he believes rigid labour laws continue to limit the country’s economic performance.

According to the prime minister, the current labour system makes it difficult for businesses to respond quickly to market demands and investment opportunities. The proposed reforms would introduce greater flexibility in hiring practices and working-hour management.

Among the measures under discussion are changes to outsourcing regulations and the introduction of “time-bank” systems. These arrangements would allow employees to accumulate extra working hours during periods of high demand and later recover that time through paid leave or additional salary compensation.

The centre-right minority government hopes to secure parliamentary approval for the reforms in the coming weeks. Nevertheless, labour unions and worker representatives have expressed concerns that some of the proposed measures could weaken employee protections and reduce job security.

Montenegro insisted that the government does not intend to remove workers’ rights but instead aims to create a balanced system capable of encouraging investment while preserving social stability. He stated that Portugal could potentially achieve annual economic growth between 3.5% and 4% if investment increases under a more flexible labour environment.

In recent years, Portugal’s economy has generally grown between 1.5% and 2%, a pace the government considers insufficient for long-term development and international competitiveness.

Economic analysts note that labour reforms remain a sensitive political issue across Europe, where governments often try to balance business competitiveness with employee protections and social rights.