Wednesday

28th Sep 2022

Portuguese court throws out 'unconstitutional' pay and pension cuts

  • Portugal's supreme court has posed its latest challenge to the government's planned austerity measures (Photo: David Baxendale)

Portugal’s supreme court threw out cuts to welfare and public sector pay in the latest challenge to Pedro Coelho’s government.

In a ruling announced on Friday night (30 May), the court stated that public sector pay cuts worth between 2 and 12 percent, as well as cuts to pensions and welfare benefits were unconstitutional.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The court ruling will not be applied retroactively to cuts which were applied in January, but will come into immediate effect.

"Budget execution has reached half way (through the year) and so these substantial amounts could damage budget consolidation targets," said Joaquim de Sousa Ribeiro, president of the supreme court.

Even so, the decision is set to cost the Portuguese government around €700 million.

The move is the latest in a series of court rulings deeming planned austerity measures to be unconstitutional that have challenged the centre-right government of Pedro Coelho since Portugal was forced to take emergency loans in 2011.

As with previous rulings, however, it leaves the government needing to propose alternative spending cuts or tax rises to make up the lost revenue.

Portugal exited its three-year €78 billion bailout programme at the start of May without requesting any further loans, just as Ireland had done in November 2013.

Despite a successful return to the financial markets, where interest rates on ten year bonds have continued to fall, reaching 3.6 percent last week, the country faces a rocky economic future.

The Portuguese economy shrank by 0.7 percent in the first three months of 2014 after returning to growth in the second half of last year. Despite the setback, it is forecast to grow by 1.2 percent through 2014.

Meanwhile, although unemployment has fallen to 15.2 percent from a peak of 17.7 percent, youth unemployment, at 35 percent, is a long-term structural problem for the Portuguese economy.

Portugal must trim its budget deficit to 4 percent by the end of 2014 and to 2.5 percent in 2015.

The country's debt is also a problem – with the bailout having increased the overall indebtedness from 93 percent of GDP to 129 percent.

For its part, the European Commission will give its verdict on Portugal’s progress on Monday (2 June), as part of an annual report containing economic recommendations for all 28 EU countries.

Although a number of countries remain on the EU executive’s 'watchlist', the average deficit rate has fallen to 3 percent, just inside the limit set by the bloc’s stability pact, and all countries, barring Croatia, are expected to record growth this year.

"After years of focusing on stabilizing the crisis we are now looking at growth," a Commission official commented last week ahead of the report.

He added that the Commission's recommendations would "promote reforms that boost demand and competitiveness".

Opinion

The small price of democracy

The Portuguese constitutional court recently rejected government spending cuts for the sixth time – its judgements should give us all pause for thought.

Netherlands tops EU social safety net for the poor

The Netherlands is the only EU state where the minimum income is above the poverty line. A minimum income is not a wage but rather a social safety net to ensure people do not end up destitute.

Netherlands tops EU social safety net for the poor

The Netherlands is the only EU state where the minimum income is above the poverty line. A minimum income is not a wage but rather a social safety net to ensure people do not end up destitute.

Opinion

Can King Charles III reset the broken Brexit relationship?

The Queen's funeral was an impressive demonstration of solidarity from the EU towards a country that left the Union in 2020, and with whom the EU's relations have never recovered. Can the new King Charles III build bridges to Brussels?

News in Brief

  1. EU to ban Russian products worth €7bn a year more
  2. Denmark: CIA did not warn of Nord Stream attack
  3. Drone sightings in the North Sea 'occurred over months'
  4. Gazprom threatens to cut gas deliveries to Europe via Ukraine
  5. New compromise over EU energy emergency measures
  6. 15 states push for EU-wide gas price cap
  7. EU: Nord Stream explosions 'result of a deliberate act'
  8. EU okays €21bn Covid-recovery funding for Italy amid concern

Stakeholders' Highlights

  1. The European Association for Storage of EnergyRegister for the Energy Storage Global Conference, held in Brussels on 11-13 Oct.
  2. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos
  3. European Committee of the RegionsThe 20th edition of EURegionsWeek is ready to take off. Save your spot in Brussels.
  4. UNESDA - Soft Drinks EuropeCall for EU action – SMEs in the beverage industry call for fairer access to recycled material
  5. Nordic Council of MinistersNordic prime ministers: “We will deepen co-operation on defence”
  6. EFBWW – EFBH – FETBBConstruction workers can check wages and working conditions in 36 countries

Latest News

  1. Netherlands tops EU social safety net for the poor
  2. New EU rules to make companies liable for their AI failures
  3. Can King Charles III reset the broken Brexit relationship?
  4. Meloni's navy-blockade plan to stop Libya migrants 'unlikely'
  5. Underwater explosions were detected near Nord Stream leaks
  6. EU countries stall new pesticide rules, blame Ukraine war
  7. The UN's Uyghur report must push EU into China sanctions
  8. Russian diamonds ban 'would cost 10,000 jobs', Antwerp claims

Join EUobserver

Support quality EU news

Join us