Portugal court ruling forces cuts on education, health

Mon Apr 8, 2013 12:14pm EDT
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By Andrei Khalip

LISBON (Reuters) - Portuguese will suffer from cuts to schools and hospitals to protect civil service benefits after the constitutional court rejected austerity measures that would have reduced holiday bonuses and other public sector perks.

The government has had to scramble to find new areas to cut after the court concluded that it was unfair to single out civil servants for reductions in benefits under measures imposed to meet the terms of an international bailout program.

The decision deepens the divide between a protected class of civil servants and other workers, whose lives have become far more precarious during the worst recession since the 1970s.

Although public sector pay has fallen faster than in the private sector during Portugal's economic crisis, state workers still earn on average double the wages of the private sector. Meanwhile, all Portuguese have been hit since January by the largest tax hikes in living memory, and many economists believe more austerity measures will prolong and deepen the slump.

"This decision left me very worried. Civil servants benefit, but not the private sector. It's in the public sector where the government has to cut," said Sonia Castro 39, an unemployed secretary.

Jose Manuel, 56-year-old taxi driver in Lisbon, said the only outcome he sees is that "our lives will only get worse."

The European Commission and particularly Germany have urged Lisbon to waste no time in coming up with new savings in order to keep its bailout program on track.

On Sunday, Prime Minister Pedro Passos Coelho reaffirmed Lisbon's commitments to its fiscal tightening goals under an EU/IMF bailout, promising to compensate for the court decision with other spending cuts.   Continued...

A woman walks at Alfama neighbourhood in Lisbon April 8, 2013. REUTERS/Rafael Marchante