Portugal's constitutional court rejected four out of nine contested austerity measures in this year's budget in a ruling that deals a blow to government finances but is unlikely to derail reforms two years after the country's bailout.
The measures rejected by the court should deprive the country of at least 900 million euros in net revenues and savings. The entire package of austerity measures introduced by the 2013 budget is worth about 5 billion euros and includes the largest tax hikes in living memory, which were mostly upheld.
Analysts consider the outcome manageable and say the government should be able to cover the shortfall with additional spending cuts it has been working on at the request of lenders. Analysts say the lenders could also give Portugal more leeway in terms of budget targets. The 13 constitutional court judges have been scrutinizing articles of the 2013 budget since January when opposition parties argued that cuts to pensions and welfare benefits undermined workers' basic rights.
The court rejected cuts in pensioners' and public servants' holiday bonuses, as well as reductions to sickness leave and unemployment benefits. They upheld tougher measures such as a reduction in the number of tax brackets, which alone brings in an estimated revenue of more than 2 billion euros.
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