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article imageOp-Ed: Portugal imposes new austerity measures to meet creditor terms

By Ken Hanly     Apr 7, 2013 in Politics
Lisbon - As the result of a Constitutional Court ruling that struck down several parts of the Portuguese government's austerity budget, the prime minister claims that he will be forced to make even deeper spending cuts.
Prime Minister Pedro Coelho said that he would make further cuts to social security, health, education, and public enterprise budgets. The European Commission (EC) warned the government not to depart from the bailout terms if it wanted any further help. In a statement the Commission said, "Any departure from the programme's objectives, or their re-negotiation, would in fact neutralise the efforts already made and achieved by the Portuguese citizens." Portugal required a $101 billion bailout in 2011.
As reported earlier in the Digital Journal, the Portuguese Constitutional Court struck down some of the provisions of the budget. The amount cut represented more than $1.3 billion in savings that now need to saved by new cuts. PM Coelho repeatedly spoke of a "national emergency" in Portugal in a speech Sunday (March7). He said the ruling would force him to seek a second bailout unless he can find alternate savings. He said that tax increases were out of the question since there were already tax increases. He said the only option was to cut back more on public services. In his speech, Coelho said:"Today, we are still not out of the financial emergency which placed us in this painful crisis. After this decision by the Constitutional Court, it's not just the government's life that will become more difficult, it is the life of the Portuguese that will become more difficult and make the success of our national economic recovery more problematic."
The opposition accuses Coelho of using the court decision as an excuse to make cuts that he wanted to make in any event and that the government should resign since this is the second budget in a row that has been ruled unconstitutional. Opposition leaders say that the government has lost any credibility.
The earlier bailout in March of 2011 was requested by the previous socialist government. Coelho's conservative Social Democrats subsequently took power and have been imposing strict cuts to the tune of 13 billion euros about 8% of GDP. The unpopular cuts have led to widespread protests and a consistent shrinkage in GDP. Last year the economy shrank by 3.2%. Opposition Socialist leader Antonio Seguro said:
"The country needs a different exit strategy from the crisis, one that prioritises economic growth. The country is living in a social tragedy. This needs to change, and that change entails substituting the government."
These new cuts may cause further widespread protests. Finance Minister Vitor Gaspar said some workers could see their annual income cut by 24% next year. The measures announced will include eliminating bonuses equivalent to two months salary in 2012 and 2013 and also for retired workers who earn more than $1,390 a month. Private-sector companies will be given the option of having a half hour day increase in working hours with no additional pay. How does this save the government money? A 5% salary cut imposed on public sector workers will be retained for some workers into next year a policy begun in 2011. Gaspar was confident that the austerity budget plus structural reform would lead to growth later on in 2013, but other analysts thought the depression would last longer.
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This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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