Portugal's Banks Spent Nearly One Billion Euros on Early Retirements While Collective Layoffs Hit a Five-Year High

Two data points released on Thursday paint a complicated picture of Portugal's labor market: the country's five largest banks spent nearly one billion euros on early retirement packages over the past two years, while the number of workers affected by collective dismissal procedures climbed 18 percent in 2025 to reach a five-year high. Together, they suggest an economy that is simultaneously restructuring its financial sector and losing jobs at an accelerating pace in other industries.

Banking's Quiet Workforce Reduction

Early retirement has become standard operating procedure in Portuguese banking. According to figures compiled by Jornal de Notícias, the five principal institutions — Caixa Geral de Depósitos (CGD), Novobanco, BPI, Millennium BCP, and Santander Totta — collectively spent close to one billion euros on early retirement programs between 2024 and the first half of 2025.

The state-owned CGD led the pack by a wide margin, allocating 513 million euros to pension plans and early retirement schemes in 2024 alone, followed by another 209 million in the first six months of 2025. These numbers dwarf the spending at private institutions: BPI spent 62.5 million on 236 early departures in 2024, Novobanco allocated 20.2 million that year, Millennium BCP spent 10.4 million, and Santander Totta 8.8 million.

The trend reflects a sector that has been aggressively cutting headcount for over a decade. Portuguese banks have closed hundreds of branches as digital banking adoption has surged, and early retirement packages have been the preferred mechanism for reducing staff without the political and legal complications of outright layoffs. For the banks, which are recording healthy profits in the current interest rate environment, funding early retirement is an affordable way to trim fixed costs.

For the workers accepting these packages, the calculation is different. Many are in their fifties, leaving the workforce earlier than planned with pension arrangements that may not fully compensate for lost earning years. The knock-on effect for Portugal's already strained social security system is real, though difficult to quantify immediately.

Layoffs Climbing Across the Economy

Beyond banking, the broader labor market is showing signs of strain. Data from the Directorate-General for Employment and Labor Relations (DGERT) shows that workers covered by collective dismissal proceedings initiated in 2025 rose 18.4 percent year-on-year, while those actually dismissed through completed proceedings increased 13.4 percent.

In total, 552 companies initiated collective dismissal processes covering 7,572 workers last year. That figure — the highest since 2020, the main pandemic impact year — has been rising for three consecutive years, a trend that sits uneasily alongside Portugal's historically low unemployment rate of 5.6 percent.

The disconnect between low headline unemployment and rising layoffs can be partly explained by the nature of Portugal's recovery. The economy has been creating jobs heavily concentrated in tourism, hospitality, and services, while more traditional sectors and some technology companies have been shedding staff. The workers being laid off and those being hired are often in different sectors, regions, and skill brackets.

The Fuel Tax Quietly Adding Up

Meanwhile, a separate analysis of budget execution data revealed that the Portuguese state collected 656.3 million euros from the petroleum and energy products tax (ISP) in January and February 2026 alone — an average of more than 11 million euros per day. That represents a 3.1 percent increase over the same period in 2025.

Before the government applied any extraordinary ISP discounts to cushion the impact of Middle East conflict-driven fuel price increases, the tax represented 37 percent of the price of diesel and 46 percent of gasoline. Add VAT at roughly 18 percent in both cases, and more than half the price consumers pay at the pump goes directly to the state.

For expats and residents running household budgets in Portugal, these numbers put context around fuel costs that remain a significant monthly expense, particularly outside Lisbon and Porto where public transport alternatives are limited.

A Labor Market in Transition

Taken together, Thursday's data releases suggest Portugal is navigating the kind of structural transition common across developed economies: a financial sector automating and downsizing, traditional industries facing competitive pressures that lead to workforce reductions, and a tax system that extracts significant revenue from everyday consumption. The low unemployment headline masks a more nuanced reality where the quality and stability of employment matter as much as the quantity.

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