Portugal’s PM rejigs £1.3bn cuts

 
Tim Wallace
Follow Tim
PORTUGAL’S Prime Minister last night vowed to cut another €1.5bn (£1.27bn) from government spending after a court struck down previous plans to reduce the country’s budget deficit.

Four key measures were rejected by the constitutional court on Friday, including plans to end summer holiday bonuses for state sector workers and cut jobless benefits.

The moves could have saved up to €1.5bn and were required under the terms of the IMF and EU bailout.

After a crisis meeting Prime Minister Pedro Passos Coelho pledged to plug the gap with further cuts to health, education and social spending rather than any more tax hikes. But he added the court’s decision means it will be harder to convince other Eurozone countries, the IMF and the European Central Bank – the Troika – to hand over the next tranche of bailout money.

“The decision has very serious consequences for the whole country,” Coelho said. “I will have to explain the circumstances to the Troika to defend the national interest.”

Last night the EC warned that deviation from the austerity program could jeopardise future aid.

“Continued and determined implementation” of the austerity program “is a precondition for a decision on the lengthening of the maturities of the financial assistance to Portugal” it said in a statement.

A meeting of the Eurogroup this Thursday will discuss the future of the loans to the nation.

Portugal hopes the maturity dates of its bailout loans will be extended to allow it easier access to funds from the market instead, exiting the bailout programme next year.