Portugal's Constitutional Court Blocks Bailout Measures

This post is part of our special coverage Europe in Crisis.

Portugal's Constitutional Court has struck down [pt] austerity measures considered necessary by the government to meet the conditions of its 78-billion-euro (101 billion US dollars) bailout program, opening a gap of 1.3 billion euros in the country's 2013 budget.

The court, which reviewed the constitutionality of the measures at the request in early January 2013 of President Cavaco Silva and all opposition parties, announced that it had rejected four of this year's budget's nine contested measures on April 5, 2013. It ruled that wage and pension cuts as well as reductions to sick leave and unemployment benefits violated the country's constitutional principles of equality and fair distribution of fiscal burden.

Prime Minister Pedro Passos Coelho warned that the government will now have to find spending cuts elsewhere to make up the deficit.

Portugal opened its doors for the “troika”, formed by the International Monetary Fund (IMF), European Central Bank, and the European Commission (EC), on April 6, 2011 to bailout the country's public debt. The Portuguese people, after nearly two years scraping by with austerity and economic recession, reacted to the court's ruling harshly.

Portugal's government defeated a no confidence motion, while the move united all the opposition in parliament against austerity policies and rattled the stock market. Photo by Thomas Meyer copyright Demotix (03/04/2013)

Days before the Constitutional Court blocked austerity measures, Portugal's government survived a no-confidence motion brought against it by the opposition. Photo by Thomas Meyer copyright Demotix (03/04/2013)

In light of the year's now dysfunctional state budget, having had parts of it struck down in April, Max writing on the blog Informação Incorrecta claimed [pt] that the government has two options: asking the troika for “more time to meet budget deficit targets” which should reach this year 5.5 percent of the GDP, or asking for one more bailout tranche:

o chumbo do Tribunal representa talvez a única possibilidade para chamar em causa responsabilidades alheias e invocar uma nova ajuda do FMI-BCE-UE.

Que fique claro: um segundo resgate seria uma tragédia e a esperança é que a troika aceite conceder mais tempo para que Portugal consiga alcançar os objectivos orçamentais. Pessoalmente espero estar enganado. Mas não podemos esquecer que o País tem uma economia em recessão, um desemprego que não baixa (e que aumentará nos próximos tempos), enormes juros que têm de ser pagos, receitas fiscais em queda. E nos cofres não há um tostão.

the Court's admonishment perhaps represents the only possibility [for the government] to call into question someone else's responsibilities and to invoke a new aid from IMF-EU-ECB.

Let it be clear: a second bailout would be a tragedy and the hope is that the troika agrees to concede more time for Portugal to achieve the budgetary targets. Personally I hope to be wrong. But we must not forget that the country has an economy in recession, an unemployment [rate] that doesn't get any better (and it wont in the near future), huge interest rates that must be paid, falling tax revenues. And in the coffers there is not a penny.

On blog Aventar, Jorge “Fliscorno” argued [pt] that the prime minister “knew from the outset that the budget would not be constitutional” but used it as a strategy to achieve a goal:

Passos Coelho anunciou que precisa de  ir buscar a outro lado o dinheiro que previa sacar ilegalmente aos portugueses. (…) Ficou com um pretexto para prosseguir a política que tem levado a cabo desde que foi eleito e completamente em oposição ao que prometeu enquanto oposição e em campanha eleitoral. (…)

O Primeiro-ministro deste país faltou novamente à palavra e anunciou mais cortes na  segurança social, saúde, educação e empresas públicas.

Passos Coelho announced that he needs look elsewhere for money that he expected to take illegally from the Portuguese. (…) He has the excuse to go on with the policy that he has undertaken since being elected and in complete opposition to what he promised while in opposition and in electoral campaign. (…)

The prime minister of this country has once again gone against his word and announced more cuts in social welfare, health, education, and public companies.

It was “the D week for Portuguese politics”, wrote journalist Tiago Carrasco on The Crisis Republic blog. In fact, in the days before the Constitutional Court's decision became known, Minister of Parliamentary Affairs Miguel Relvas, who is the prime minister's controversial right-hand man, resigned, and the main opposition Socialist Party presented a motion of no-confidence against the government in the Parliament, which ultimately failed.

But as Carrasco said, “the real motion of no confidence [would] come at the end of the week” with the analysis of the 2013′s annual budget. He predicted that “the coalition government will probably fall”, an idea already shared by many, including labor unions, opposition party politicians, and citizens:

First because it’s the second time [the government] would deal with a Constitutional error. Second, they would face an [sic] huge popular protest. And finally (and the most important one) the internal coalition is already rotten with centrists PP’s [People's Party] deputies disagreeing often with liberal’s measures and many discussions about the minister’s recasting.

So Portugal calmly waits for the announced political collapse.

This post is part of our special coverage Europe in Crisis.


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