Latest stop on the eurozone debt tour: Portugal
posted at 1:21 pm on April 8, 2013 by Erika Johnsen
The eurozone’s ongoing debt-crisis attention is shifting from Cyprus to Portugal this week, and not in a good way. Portugal has been struggling with a shrinking economy and unemployment sitting at 17 percent, and last Friday, a Constitutional Court struck down several of the austerity measures the government was hoping to implement to keep their international bailout program in the clear:
In an address to his beleaguered nation on Sunday, Prime Minister Pedro Passos Coelho warned that his government would be forced to cut spending more and that lives “will become more difficult” after a court on Friday struck down some of the austerity measures put in place after a bailout package two years ago. …
A critical moment for the latest trouble took place on Friday, when Portugal’s Constitutional Court struck down four of nine contested austerity measures that the government introduced as part of a 2013 budget that included about 5 billion euros, or $6.5 billion, of tax increases and spending cuts. The ruling left the government short about 1.4 billion euros of expected revenue, or more than one-fifth of the 2013 austerity package.
Specifically, the court, which began reviewing the legality of the government’s austerity measures in January, ruled as unconstitutional and discriminatory the government’s plans to cut holiday bonuses for civil servants and pensioners, as well as to reduce sick leave and unemployment benefits.
It doesn’t look like their international lenders are going to grant them any leeway, which means that the Portuguese government will now need to think up some new ways to raise revenue to meet their budgetary targets. One of the brilliant ideas that’s reportedly been floated already?
In his televised statement, Mr. Passos Coelho said the government would try to revise its budget plan through new spending cuts rather than new tax increases. A person close to the government said it had mulled the idea of paying public employees and pensioners one month of their income in Treasury bills, forcing them, in effect, to lend the Treasury the money the court said it couldn’t cut from their paychecks. A government spokeswoman denied that the idea was being considered.
…I would certainly hope the idea isn’t being considered, because something tells me that just deciding to pay your workers in feeble government promises wouldn’t go over well on any front. With any luck, they won’t be going down that road, but this idea just after the Cyprus debacle? How long are Americans going to buy the Democrats’ line that our $16-going-on-$17 trillion debt isn’t really an urgent crisis with which we need to deal swiftly and decisively, and that we can just go on spending pretty much the same way we have been for years to come? Does anybody else feel like they’re taking crazy pills?