Brussels, 05/04/2013 (Agence Europe) - Speculation was rife on Friday 5 April about the publication of the verdict of the Portuguese constitutional court on various measures of the country's 2013 budget unveiled in January by the government of Pedro Passos Coelho (see EUROPE 10758).
The draft budget was sent to court by the Portuguese president Anibal Cavaco Silva, who challenged the €5.3 billion of savings, of which €4 billion are from tax rises. The measures being challenged are the scrapping of the fourteenth month bonus for civil servants and pensioners and a new solidarity tax on pensions of over €1,350, which would raise between €400 million and nearly €2 billion.
As soon as the constitutional court gives its verdict, the Portuguese government will decide on its budget. The European Commission will assess any future measures the Portuguese government may be asked to introduce.
While awaiting the verdict, the interest rate on ten-year Portuguese bonds rose on Friday, reflecting market fears. Portugal is facing a worse-than-forecast recession and was given extra time earlier this month to achieve its budget targets. It is now required to reduce its public deficit to 5.5% of GDP in 2013, 4% in 2014 and 2.5% in 2015. In 2012, the deficit was 4.9%. In its Winter Economic Forecasts, the European Commission says that Portugal's recession will be 1.5% of GDP in 2013, an improvement on the 3.2% recession in 2012.
Little room for manoeuvre. Faced with a population that is growing ever more hostile to the falling standards of living, the government has little room for manoeuvre. The old political consensus under which the socialist opposition went along with the structural adjustment programme implemented as a condition for the international aid package, has fallen apart. The centre-right party holds the majority in parliament and saw down a motion of no confidence from the socialists this week. On Thursday, the highly influential parliamentary affairs minister, Miguel Rivas, was forced to resign for cheating to get his university degree. (MB/transl.fl)