Pressure on Portugal to Stick to Budget Targets Heats Up


Portugal must stick to targets agreed with international lenders if it wants more time to repay bailout loans, the European Commission said in a statement on Sunday.

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Portugal's constitutional court on Friday rejected four out of nine contested austerity measures from this year's budget. The ruling deals a blow to government finances, but is unlikely to derail the bailed-out country's reforms.

"Continued and determined implementation of the programme ... is a precondition for a decision on the lengthening of the maturities of the financial assistance to Portugal, which would facilitate Portugal's return to the financial markets and the attainment of the programme's objectives," it said.

Portugal, like Ireland, is seeking an extension of the maturities of the emergency loans it is getting from the European Union beyond 2022 to smooth out its financing needs.

EU finance ministers are to decide the details of the extension next Friday.

The fiscal measures rejected by the court should deprive the state of some 900 million euros ($1.17 billion) in net revenues and savings, according to preliminary estimates by economists.

The 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.

"The European Commission welcomes that, following the decision of the Portuguese Constitutional Court on the 2013 state budget, the Portuguese Government has confirmed its commitment to the adjustment programme, including its fiscal targets and timeline," the Commission said.

The European Union executive arm said that any departure from the programme's objectives, or their renegotiation, would neutralise the growing investor confidence in Portugal and prolong the difficulties from the adjustment.