Wednesday

31st Aug 2016

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.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

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".

Poland may remove constitutional judges

Amid a long-lasting dispute over the functioning of Poland's constitutional court, a senior Law and Justice MP suggests removing judges who obstruct parliament.

Stakeholders' Highlights

  1. EBECBright Engineering Students Designed the Future, Today at the BEST Competition
  2. Access NowInternet wins! Net Neutrality Victory in EU
  3. EuridThe 2016 .eu Web Awards is a Chance to Make Dreams Come True so Vote Today !
  4. Nordic CouncilNordic-Baltic Co-operation Vital in Turbulent Times
  5. GoogleBrussels: Home of Beer, Fries, Chocolate and Google’s Policy Team - follow @GoogleBrussels
  6. HuaweiSeeds for the Future Programme to Bring Students to China for ICT Training
  7. EFASpain is Not a Democratic State. EFA Expresses Solidarity to A. Otegi and EH Bildu
  8. UNICEFBoko Haram Violence in Lake Chad Region Leaves Children Displaced and Trapped
  9. HuaweiMaking Cities Smarter and Safer
  10. GoogleHow Google Makes Connections More Secure For Users
  11. EGBAThe EU Court of Justice Applies Proportionality in Assessing Gambling Laws
  12. World VisionThe EU and Member States Must Not Use Overseas Aid for Promoting EU Interests

Latest News

  1. Verheugen went off-script in VW cheat testimony
  2. Poland may remove constitutional judges
  3. Spain's Rajoy faces uphill battle to win MPs' support
  4. Russia and Turkey restart talks on EU gas pipeline
  5. MEPs call for reconciliation with Turkey
  6. Egypt blames EU-Turkey deal for refugee spike
  7. EU dithering aggravated refugee crisis, Merkel says
  8. Verheugen did not think VW cheating was morally possible