LISBON (Reuters) - Portugal’s EU and IMF lenders said on Thursday the country’s adjustment program under a bailout is broadly on track amid early signs of economic recovery, but warned the Constitutional Court could put Lisbon’s return to market financing at risk.
“The program remains broadly on track, with the authorities determined to achieve its objectives... Provided the authorities persevere with steadfast program implementation, euro area member states have declared they stand ready to support Portugal until full market access is regained,” they said in a statement.
It said the program’s 2013 fiscal deficit target of 5.5 percent of GDP is within reach, while the government has reaffirmed its commitment to the 2014 deficit target of 4 percent.
But recalling that the Constitutional Court has shot down several government austerity measures over the past 14 months, they said the possibility of more measures being declared unconstitutional would require a change to the 2014 draft budget in order to meet the agreed deficit target.
“This, however, would imply increasing risks to growth and employment and would reduce the prospects for a sustained return to financial markets,” the statement said.
Reporting By Andrei Khalip, editing by Axel Bugge