Saturday

23rd Jun 2018

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

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... our join 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.

Greece and creditors proclaim 'end of crisis'

After late-night talks, the Eurogroup agreed on a €15bn disbursement and debt relief measures for Greece, while setting out a tight monitoring when the bailout ends in August.

News in Brief

  1. Venice Commission: Hungary should repeal NGO law
  2. Trump threatens to slap 20 percent tariff on EU cars
  3. EU closes deficit procedure against France
  4. Romania's ruling party leader gets jail sentence
  5. EU states defer individual decisions on asylum reforms
  6. Commission opens case on Qatar gas flow
  7. EU adopts posted workers directive
  8. EU leaders to call for 'coordinated plan' on AI

Stakeholders' Highlights

  1. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  2. Macedonian Human Rights MovementMHRMI Launches Lawsuits Against Individuals and Countries Involved in Changing Macedonia's Name
  3. IPHRCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  4. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  5. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  6. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  7. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  8. Mission of China to the EUChina: Work Together for a Better Globalisation
  9. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  10. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  11. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  12. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network

Latest News

  1. Migration row at centre of EU summit This Week
  2. Merkel's woes cast shadow on EU's future
  3. Europe's tech race - trying to keep pace with US and China
  4. Merkel and Juncker's mini-summit risks fiasco
  5. Greece and creditors proclaim 'end of crisis'
  6. How a US firm pushed for EU €2.1trn pension fund
  7. Commission defends Africa migrant plan ahead of summit
  8. Bavaria hijacks EU migration talks

Join EUobserver

Support quality EU news

Join us