Forget Cyprus, here comes ... Portugal! Again!
Things appear to be going from bad to worse in Portugal.
Last week, the country’s top court ruled a series of austerity measures, outlined by Prime Minister Pedro Passos Coelho, as unconstitutional, refusing to allow cuts to pensions and public sector wages.
That means Coelho must go back to the drawing board, looking for savings to comply with the terms of Portugal’s 78 billion euro (about $102 billion Cdn) bailout package from the troika of European lenders – the European Central Bank, the International Monetary Fund and the European Commission.
Coelho took to the airwaves on Sunday night to tell Portugese TV viewers that he has no choice but to make deep cuts to health, education and social services. No doubt the news did not sit well with the Portuguese. Unemployment is nearly 20 per cent and previous austerity cuts have unleashed violent protests.
The Financial Times is reporting that unless Portugal comes up with a plan, and fast, they won’t get the next installment of 2 billion euros. European Union finance ministers, fresh from their head-spinning Cyprus bailout shenanigans, will now meet on Friday in Dublin to talk about what to do with Portugal.
But all is not lost.
Jose Manual Barroso, head of the European Commission, sent out a positive statement of support, welcoming the decision of the Portuguese Constitutional Court, adding the Portuguese government is committed to following austerity measures.
Those would be measures Barroso also championed when he was prime minister of Portugal from 2002 to 2004.
“Continued and determined implementation of the programme offers the best way to restore sustainable economic growth and to improve employment opportunities in Portugal,” Barroso said.
“The Commission will continue to work constructively with the Portuguese authorities within the parameters agreed to alleviate the social consequences of the crisis.”
Why do I get the feeling nobody is breathing a sigh of relief?
Tanya Talaga is the Star’s global economics reporter. Follow her on Twitter @tanyatalaga