Portuguese court strikes down rescue pay cuts

Portugal's constitutional court has struck down a move by the center-right government to push through cuts to civil servants' salaries, a key part of the country's austerity package. The government has adopted a program to abolish a thirteenth and fourteenth month of pay for public sectors workers, and for pensioners earning more than 1,000 euros ($1,238) per month, for three years from this year. The measure violated the principle of equality enshrined in the constitution because it forced additional cuts on state employees and pensioners which were not imposed on others, the court said in a ruling issued late on Thursday. But the court nevertheless said the measure should stay in force for the current year because it did not want the ruling to hit the government's target for reducing the deficit. Opposition left-wing deputies took the issue to the court in January. The controversial wage cuts were part of an austerity package introduced to cut the public deficit, agreed with the European Union and the International Monetary Fund in return for a rescue of 78 billion euros ($96.5 billion) bailout granted last October. Tens of thousands of people have demonstrated against the cuts, but the government has insisted that they are necessary to reduce the public deficit. In some European countries, annual pay is spread over more than 12 months, for various reasons including facilitating paying tax and for holidays. The administration of Prime Minister Pedro Passos Coelho has promised creditors that it will achieve a deficit to 4.5 percent of output this year and to 3.0 percent at the end of 2013. The deficit ratio last year was 4.2 percent, better than the target of 5.9 percent, but this was achieved with substantial and exceptional revenues. In the first quarter of this year, the deficit was running at 7.86 percent of output. Portugal is hoping to follow the example set by Ireland, also rescued by the European Union and International Monetary Fund, and win sufficient credibility on financial markets to be able to begin borrowing funds at bearable rates on the open market.