Portuguese Prime Minister Pedro Passos Coelho on Sunday announced new cuts in social security, health programmes, education and state-run businesses after the Constitutional Court struck down austerity measures contained in the 2013 budget.
His centre-right Government rejected any further tax hikes, Passos Coelho said as he tries to meet the terms of a bailout agreed with the European Union and International Monetary Fund, which granted Lisbon an emergency loan worth 78 billion euros ($101 billion) in 2011.
Passos Coelho said his Government would do everything possible to prevent the need to seek a second bailout and accused the court of endangering the country.
“This government stands by all goals of the aid package,” he said.
“The Portuguese Government will comply with its domestic and international obligations.” The Constitutional Court on Friday declared four of Passos Coelho’s austerity measures illegal, including the elimination of public workers’ and pensioners’ vacation bonuses and cuts in unemployment benefits.
Portugal’s creditors agreed in March to give it one more year — until 2015 — to cut its budget deficit from 6.4 per cent of its gross domestic product in 2012 to less than 3 per cent.
In exchange, Passos Coelho promised to cut spending by a further 4 billion euros by 2015, but the court decision left him short of about 1.3 billion euros and is forcing him to find new ways to cut spending. He refused on Sunday to raise taxes, however, warning the danger to the economy would be too great.
Portuguese President Anibal Cavaco Silva late Saturday rejected the call for early elections despite the worsening of the financial crisis facing the European country.
Socialist leader Antonio Jose Seguro on Saturday had called for early elections because Passos Coelho had lost his “credibility and authority.” Communist leader Jeronimo de Sousa said his party would be willing to enter a new left-wing government.
Cavaco Silva had already on Friday rejected calls for snap elections, saying the Government’s legitimacy had been endorsed by a parliamentary no-confidence vote that Passos Coelho won this week.
Passos Coelho’s conservative government coalition has an absolute majority in Parliament.