Portugal warned of further spending cuts

 

Portugal has been warned of further spending cuts, following two years of tough austerity measures since it needed an international financial rescue.

Prime minister Pedro Passos Coelho told his country yesterday to brace for even harder times after a court ruling forced his government to find more savings through steep spending reductions.

He said in a sombre televised address to the nation that his centre-right government must slash public services because of a court decision to disallow some of its latest tax hikes.

A new crackdown on public spending will focus on social security, education, health services and state-run companies, he said.

That is likely to bring more layoffs as Portugal scrambles to restore its financial health after it needed a 78 billion euro (£66 billion) bailout in 2011.

"Today, we are still not out of the financial emergency which placed us in this painful crisis," Mr Passos Coelho said.

Portugal's worsening problems threaten to reignite the eurozone's financial crisis not long after Cyprus became the fifth member of the 17-nation bloc to require rescue.

The Portuguese economy contracted 3.2% last year and is forecast to shrink 2.3% in 2013 for a third straight year of recession. The unemployment rate, currently at a record 17.5%, is forecast to climb to 18.5% in 2014.

European leaders have for three years struggled to contain the financial crisis, and Portugal's ongoing problems illustrate the dilemma of finding a balance between austerity measures and growth policies.

Many Europeans want to abandon the austerity path and start spending again to create jobs and wealth.

The Constitutional Court on Friday prohibited pay cuts for government workers and pensioners included in this year's state budget, leaving the government just nine months to make up for the sudden shortfall of 1.3 billion euros (£1.1 billion).

"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," Mr Passos Coelho said.

He noted that Portugal has made progress on reducing its budget deficit, which stood at 10.1% in 2010. Last year, it was 6.4%.

Even so, the three main international ratings agencies still classify Portuguese government bonds as junk.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
filmPoldark production team claims innocence of viewers' ab frenzy
Life and Style
Google marks the 81st anniversary of the Loch Ness Monster's most famous photograph
techIt's the 81st anniversary of THAT iconic photograph
News
Katie Hopkins makes a living out of courting controversy
people
News
General Election
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Office Administrator

£14000 - £18000 per annum: Recruitment Genius: An Office Administrator is requ...

Recruitment Genius: Sales Executive - Commercial Vehicles - OTE £40,000

£12000 - £40000 per annum: Recruitment Genius: Due to expansion and growth of ...

Ashdown Group: Senior PHP Developer - Sheffield - £50,000

£40000 - £50000 per annum: Ashdown Group: Senior PHP Developer position with a...

Recruitment Genius: Operations Leader - Plasma Processing

Negotiable: Recruitment Genius: An Operations Leader is required to join a lea...

Day In a Page

Revealed: Why Mohammed Emwazi chose the 'safe option' of fighting for Isis, rather than following his friends to al-Shabaab in Somalia

Why Mohammed Emwazi chose Isis

His friends were betrayed and killed by al-Shabaab
'The solution can never be to impassively watch on while desperate people drown'
An open letter to David Cameron: Building fortress Europe has had deadly results

Open letter to David Cameron

Building the walls of fortress Europe has had deadly results
Tory candidates' tweets not as 'spontaneous' as they seem - you don't say!

You don't say!

Tory candidates' election tweets not as 'spontaneous' as they appear
Mubi: Netflix for people who want to stop just watching trash

So what is Mubi?

Netflix for people who want to stop just watching trash all the time
The impossible job: how to follow Kevin Spacey?

The hardest job in theatre?

How to follow Kevin Spacey
Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

Armenian genocide and the 'good Turks'

To continue to deny the truth of this mass human cruelty is close to a criminal lie
Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

'Lou needed care, but what he got was ECT'

The truth about the singer's upbringing beyond
Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

This human tragedy has been brewing for years

EU states can't say they were not warned
Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

Women's sportswear

From tackling a marathon to a jog in the park, the right kit can help
Hillary Clinton's outfits will be as important as her policies in her presidential bid

Clinton's clothes

Like it or not, her outfits will be as important as her policies
NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders