Unconstitutional pension cuts rejected by Portuguese Court

Portugal court rejects ‘unconstitutional’ pension cuts

Economists have seen the court as the biggest threat to Portugal’s efforts to exit the bailout as planned

9:49PM GMT 19 Dec 2013CommentsComments
http://www.telegraph.co.uk/finance/financialcrisis/10529375/Portugal-court-rejects-unconstitutional-pension-cuts.html

Portugal’s Constitutional Court has rejected a government bid to cut public sector pensions, dealing a blow to its efforts to cut spending ahead of its planned exit from a bailout in mid-2014.

The court ruling said the move was “unconstitutional as this violates the principle of trust”, saying that pensioners’ savings could not be taken from them.

Economists have seen the court as the biggest threat to Portugal’s efforts to exit the bailout as planned, as it has rejected a series of austerity measures, forcing the government to look for savings elsewhere.

The cut in pensions would have saved the government around €380m. While that number is not large, another set of measures to cut public sector workers’ salaries could also be challenged in the same court.

The government has so far said it has not prepared alternative fiscal measures for any possible rejections by the court. However, local media has said the government could consider further tax increases as an alternative.

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