The Constitutional Court unanimously has rejected the Portuguese government's pension cutting plans, citing a violation of the principle of trust in Article 2 of the Constitution.
The court has put the government in another budgetary hole as Passos Coelho’s regime wanted a 10% cut of the gross amount of pensions and in their overall value to save the exchequer approximately €728 million next financial year, as in the 2014 budget.
The President of the Constitutional Court, Joaquim Sousa Ribeiro, held that the Constitution enshrines the right to a pension, and such a right, once consecrated, will have to have good a constitutional basis for any changes.
Where next? The government is under the Troika spotlight still and will have to come up with a Plan B to fill the gap. Dark threats of ‘raising taxes’ in an attempt to influence the court’s decision proved ineffective and certainly would be unpopular. Reductions in state spending to date have fallen woefully below the optimistic figures agreed with the country’s paymasters and any strategy to do so will be looked at against a backdrop of failure.
A further agreed reduction in the country’s growth target is not an option as it has been used several times before. A reliance on increased income to the state machine from a buoyant economy is another weak hand as the Troika needs facts, not wishes.
The government could well do without the final say-so of the Constitutional Court but this system is the people's defense against unilateral government proposals which break the terms of the constitution, the agreed set of laws that gives the people a framework within which to live.
"The Government will consider things in order to submit a timely, appropriate solution to address the structural problem of pensions. This is a time that requires great serenity and responsibility," commented the prime minister in Brussels.
Pedro Passos Coelho said that it is necessary to study the judgment carefully and look at the alternatives, stressing that ‘doors had been left open.’
"As Prime Minister I will do everything in my power to ensure that the sacrifices are not in vain and that we do not compromise our objectives for growth and employment."
Asked about a possible tax increase, Passos Coelho said that all options will be considered and were not excluded.
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See also Algarve Newswatch for Len Port's commentary : http://algarvenewswatch.blogspot.pt/2013/12/top-judges-spark-pre-christmas-crisis.html
