LISBON—A political rift was opened in Portugal on Wednesday after the country's president sent the 2013 budget to its highest court for review, an unusual move that highlights deepening opposition to a two-year austerity drive.
President Anibal Cavaco Silva, who is the head of state and belongs to the same right-of-center political party as Prime Minister Pedro Passos Coelho, signed the budget bill into law on Monday, but expressed reservations the next day.
In a late televised address to the nation, he expressed doubts about the budget's "distribution of sacrifices," while calling for an end to the "recession spiral" the country is undergoing.
Analysts say Mr. Cavaco's decision marks a compromise following pressure from critics who question the budget's fairness, such as the country's National Association of Judges, and allows the country to have a budget in place while the issue is being resolved.
Still, the decision represents a potential setback for Mr. Passos Coelho, who has struggled to reform Portugal's costly welfare state and improve the competitiveness of Western Europe's poorest country.
Portugal's Socialist Party, the main opposition group, said Mr. Cavaco's announcement is evidence that Mr. Passos Coelho is "profoundly isolated" in his pro-austerity stance.
In July last year, the constitutional court ruled a government plan to cut public-sector workers' traditional extra two months of salary each year from 2012-14 was unconstitutional.
The government then said it would raise income taxes on the entire population, but it still kept a cut amounting to one month's salary of public-sector workers' pay.
If the 2013 budget is deemed unconstitutional, it may complicate the government's efforts to reduce the country's budget deficit to 4.5% of gross domestic product this year, from an expected 5%-of-GDP deficit in 2012, part of the commitments included in a €78 billion ($102.92 billion) bailout agreement with the European Commission, the European Central Bank and the International Monetary Fund.
Simon O'Connor, a spokesman for European economics Commissioner Olli Rehn said the commission noted the Portuguese president's decision but had no specific comment to make.
"The Commission very recently set out in detail its views on the Portuguese economy, including the outlook for growth and the ongoing consolidation of public finances, in our report on the sixth review of the economic adjustment program, published on December 21," Mr. O'Connor added.
Portugal's budget includes €4.3 billion in tax increases on income, capital gains and property, and €1 billion in additional spending cuts compared with the 2012 budget.
Mr. Cavaco said late on Tuesday that the "court will be asked to decide on the conformance of the 2013 state budget with the constitution."
Elaborating on his move on Wednesday, he said he specifically wants to know whether the constitution allows for controversial steps such as salary cuts for public workers and pensioners, and a tax surcharge for pensions above €1,350 a month—issues raised by constitutional experts.
University of Lisbon political analyst Antonio Costa Pinto said he expects at least some of the measures in the budget to be overturned, but added the government should "easily make the necessary adjustments to the budget."
Most importantly, Mr. Costa Pinto said that in the future the government will have to be more careful when applying cuts, as opposition parties will be more keen to use the constitution as a political weapon.
Also in the address Tuesday, and in his most critical words to date on the issue, the president said leading Portuguese companies are being forced to shut down and unemployment is rising amid the recent cuts.
"We have arguments—and we should use them firmly—to demand the support of our European partners in a way that will bring a more harmonious balance between the consolidation program and economic growth," Mr. Cavaco said.
wsj.com
President Anibal Cavaco Silva, who is the head of state and belongs to the same right-of-center political party as Prime Minister Pedro Passos Coelho, signed the budget bill into law on Monday, but expressed reservations the next day.
In a late televised address to the nation, he expressed doubts about the budget's "distribution of sacrifices," while calling for an end to the "recession spiral" the country is undergoing.
Analysts say Mr. Cavaco's decision marks a compromise following pressure from critics who question the budget's fairness, such as the country's National Association of Judges, and allows the country to have a budget in place while the issue is being resolved.
Still, the decision represents a potential setback for Mr. Passos Coelho, who has struggled to reform Portugal's costly welfare state and improve the competitiveness of Western Europe's poorest country.
Portugal's Socialist Party, the main opposition group, said Mr. Cavaco's announcement is evidence that Mr. Passos Coelho is "profoundly isolated" in his pro-austerity stance.
In July last year, the constitutional court ruled a government plan to cut public-sector workers' traditional extra two months of salary each year from 2012-14 was unconstitutional.
The government then said it would raise income taxes on the entire population, but it still kept a cut amounting to one month's salary of public-sector workers' pay.
If the 2013 budget is deemed unconstitutional, it may complicate the government's efforts to reduce the country's budget deficit to 4.5% of gross domestic product this year, from an expected 5%-of-GDP deficit in 2012, part of the commitments included in a €78 billion ($102.92 billion) bailout agreement with the European Commission, the European Central Bank and the International Monetary Fund.
Simon O'Connor, a spokesman for European economics Commissioner Olli Rehn said the commission noted the Portuguese president's decision but had no specific comment to make.
"The Commission very recently set out in detail its views on the Portuguese economy, including the outlook for growth and the ongoing consolidation of public finances, in our report on the sixth review of the economic adjustment program, published on December 21," Mr. O'Connor added.
Portugal's budget includes €4.3 billion in tax increases on income, capital gains and property, and €1 billion in additional spending cuts compared with the 2012 budget.
Mr. Cavaco said late on Tuesday that the "court will be asked to decide on the conformance of the 2013 state budget with the constitution."
Elaborating on his move on Wednesday, he said he specifically wants to know whether the constitution allows for controversial steps such as salary cuts for public workers and pensioners, and a tax surcharge for pensions above €1,350 a month—issues raised by constitutional experts.
University of Lisbon political analyst Antonio Costa Pinto said he expects at least some of the measures in the budget to be overturned, but added the government should "easily make the necessary adjustments to the budget."
Most importantly, Mr. Costa Pinto said that in the future the government will have to be more careful when applying cuts, as opposition parties will be more keen to use the constitution as a political weapon.
Also in the address Tuesday, and in his most critical words to date on the issue, the president said leading Portuguese companies are being forced to shut down and unemployment is rising amid the recent cuts.
"We have arguments—and we should use them firmly—to demand the support of our European partners in a way that will bring a more harmonious balance between the consolidation program and economic growth," Mr. Cavaco said.
wsj.com
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