The
approach of Christmas brings fresh worries to Portugal and its hopes
of returning to something like financial stability next year.
Once
again, the biggest threat to the government's efforts to exit the country’s bailout – and to the continued
existence of the present government itself - comes not from
politicians but judges.
The
latest decision by the nation’s Constitutional Court has blocked a
highly unpopular bid to cut public sector pensions. It is the fourth
time judges in the highest court in the land (pictured below) have blocked government
measures this year. They may do the same to plans to cut the salaries
of public sector workers.
As
with earlier rulings on austerity measures, the Constitutional Court
judges have stymied efforts to cut spending ahead of
Portugal’s planned exit from its €78 billion ($107 billion)
bailout next June.
The
latest decision outlawed a key measure in the 2014 budget calling for
cuts of up to 10 percent in civil service pensions over €600 a
month. The 13-member court unanimously declared the proposal
“unconstitutional” as it was a “violation of the principle of
trust.”
This
brought renewed calls from street protesters as well as opposition
politicians for the government’s resignation. Arménio
Carlos, leader of Portugal’s largest trade union, CGTP, condemned
the government’s austerity policies as “attacks on human rights.”
An
ever-growing number of citizens are claiming that the coalition
government is more like a dictatorship than a democratic institution
and that it has lost touch with public opinion and the people’s
needs. Protesters want President Aníbal Cavaco Silva to veto
the controversial State Budget and call early elections.
The
pension cuts would have saved an estimated €388 million, funds the
government must now find elsewhere to comply with the country’s
bailout deal with the European Union and the International Monetary
Fund. The most likely alternative savings will involve hikes in VAT,
which are sure to spark more public outrage.
While
there is serious disenchantment with the present centre-right
coalition, the question arises: would any other set of politicians in
the country be able to do any better? Incompetence and inefficiency are thought
to be rife in just about all sectors and at all levels of the
administration and the civil service.
Portugal has so far received
€71.4 billion of the bailout money it was promised. The government
hopes it can follow Ireland’s lead and exit by staying on target to
meet the bailout requirements and return to normal financing in the
bond markets.
Not
everyone is pessimistic. In the days leading up to the latest court
ruling, the European Commission expressed qualified optimism that
Portugal would be able to find an alternative way to meet its 2014
budget deficit target. “Such measures, however, could heighten
risks to growth and employment and reduce the prospects for a
sustained return to financial markets,” said a commission
spokesman.
The
Financial Times today quoted Charles Schulz, a senior economist with
Germany’s Berenberg Bank, as saying that Portugal still had a good
chance of leaving its bailout programme in June. “The economy is
growing, political risks are limited and the government is reforming
the economy. But the errors of the past will continue to weigh on
Portugal’s prospects.”
On
hearing of the court’s rejection after the first session of an EU
summit in Brussels last night, German Chancellor Angela Merkel told reporters:
“It’s not an easy situation but I think Portugal will find a way
to solve it.”
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