Portugal reorganizes budget

Portuguese Prime Minister Pedro Passos Coelho announced new harsh cuts to public spending on Sunday, two days after the Constitutional Court overruled some tax hikes he had proposed as part of his 2013 budget.

"Today, we are still not out of the financial emergency which placed us in this painful crisis," Passos Coelho said in a somber televised address to the nation. He said no new tax increases would take place this year, but that the budget would "contain public spending in the areas of social security, health and education."

The prime minister held meetings with President Anibal Cavaco Silva and his cabinet late on Saturday to evaluate the court decision. The court struck down four aspects of the 2013 budget, including the eliminating of vacation bonuses for public employees and pensioners and cuts to unemployment benefits.

The government had condemned the court's findings, saying they would have a "negative impact" on the necessary austerity.

The budget, approved by parliament last year, could have saved Portugal 5.3 billion euros ($6.85 billion), 80 percent financed by tax increases that Finance Minister Vitor Gaspar called "enormous" but indispensable to pull the country out of crisis. Portugal's creditors agreed in March to give the country until 2015 to cut its budget deficit from 6.4 percent of gross domestic product in 2012 to less than 3 percent.

Cavaco Silva, of Passos Coelho's PSD, challenged the budget alongside the opposition Socialists. The president had argued that some measures violated the principle of sharing economic sacrifices equally among all Portuguese.

"It's the laws that need to conform to the constitution and not the other way around," Court President Joaquim Sousa Ribeiro said Friday in a statement, adding that the decision covered all of 2013 and therefore carries retroactive powers.

acb, mkg/jr (AFP, dpa)