The Portuguese constitutional court has deemed parts of the country's 2013 austerity budget to be unconstitutional. The country had agreed to widespread belt-tightening in exchange for emergency international loans.
Judges in Portugal ruled late on Friday that parts of the country's 2013 budget did not conform to the country's constitution.
The belt-tightening budget put forward by the center-right government contained both tax increases and reductions in pensions, public sector wages and social welfare.
The panel of 13 judges issued a statement citing four reductions in particular as unconstitutional: a drop in holiday pay for civil servants, pension payment reductions, and cuts in unemployment and sickness benefits.
One of the reasons for the decision was that the measures did not guarantee equality, with private sector staff unaffected by the measures.
Portugal, one of the eurozone countries that has struggled to deal with its sovereign debts, was granted emergency loans worth 78 billion euros ($101 billion) by European partners and the International Monetary Fund in May 2011. As a condition for these loans, Portugal agreed to a string of austerity measures and privatizations.
The initial agreement was made by Portugal's previous center-left coalition led by the Socialist Party, who now reject the conservative Prime Minister Pedro Passos Coelho's 2013 budget. The government survived a vote of no-confidence on this issue on Wednesday.
European Union figures published earlier in the week put Portuguese unemployment at a record 17.5 percent, with 38.2 percent of would-be workers under the age of 25 unable to find a job. The country is currently in recession with the government in Lisbon predicting GDP contraction of 2.3 percent in 2013. In light of the economic situation, Portugal's international creditors in March granted the country an extra year to bring its annual budget deficit in line with EU targets.
The Associated Press reported that while the Portuguese government issued no immediate response to the constitutional court ruling late on Friday, it did unusually schedule an emergency Cabinet meeting for Saturday.
msh/rc (AFP, dpa)