State Budget dissected

news: State Budget dissected

Controversy over the 2013 State Budget continues as most opposition political groups requested this week that the Constitutional Court assesses the constitutionality of some laws.

By INÊS LOPES ines.lopes@algarveresident.com

Several requests for an assessment of the controversial 2013 State Budget have been submitted to Portugal’s Constitutional Court.

After the President of the Republic, Cavaco Silva, requested successive assessments of the budget’s legality (see last week’s edition), the PS, PCP, Bloco de Esquerda (BE) and Os Verdes (PEV) political parties, the Portuguese ombudsman, Alfredo de Sousa, and the Portuguese Judges Union (ASJP) followed suit this week.

PS members of parliament in the Azores have also announced the submission of laws to the court that they consider unconstitutional for the people of the Azores.

This will be the eighth time the State Budget, which was enacted by the President of the Republic on January 1, has been sent to the Constitutional Court for revision.

Ombudsman Alfredo Sousa is questioning the constitutionality of salary cuts for public workers and pensioners and a special solidarity contribution for pensions over €1,350.

He confirmed that “hundreds, if not thousands” of requests for his intervention regarding these issues had been sent to him. “If I didn’t act, people would question my role as ombudsman,” he said.

Meanwhile, the Secretary of State for the Budget, Luís Morais Sarmento, said that “grave consequences” could be expected for the country if Portugal’s highest court decides to reject the laws submitted for revision (see list below). “A declaration of unconstitutionality could have grave consequences for the country. In my opinion, this could lead to Portugal being unable to fulfil the commitments set within the financial assistance programme,” he said.

But PSD MP Miguel Frasquilho says it is too soon to consider a scenario of noncompliance and that if the court vetoes the state budget, “the first step should be to find alternatives with the help of those who raised doubts about the document, and then with international partners, to find viable solutions”.

||State Budget laws that have been sent to Portugal’s Constitutional Court for revision

Article 27: Salary cuts for public servants – The PCP, PEV and BE requested the court’s assessment of this law, which foresees the reduction of public servant salaries for the third consecutive year. The cut is by 3.5% for salaries over €1,500 and 10% for salaries over €4,165 a month.

Article 45: Overtime pay cuts for public workers – The PCP, PEV and BE requested revision of this law, which foresees cuts in overtime pay for public workers. In the first overtime hour, public workers will suffer a 12.5% cut and an 18.75% cut in the following hours worked.

Article 77: Suspension of pensioners’ holiday bonus – The request for inspection of this law came from the President of the Republic, the PCP, PEV, BE, the Portuguese ombudsman and the ASJP. In this article, the government outlines the suspension of 90% of pensioners’ holiday bonus for those earning a monthly pension of more than €1,100.

Article 78: Extraordinary solidarity contribution – The President of the Republic, the PS, the PCP, PEV, BE and the ombudsman requested the court’s revision of this law. The government imposes an extraordinary solidarity contribution of between 3.5% and 40% for pensions over €1,350 a month.

Suspension of holiday bonus for public workers – assessment of this law by the court was requested by the President of the Republic, PS, PCP, BE, PEV, the ombudsman and the ASJP. The State Budget foresees the suspension of the holiday bonus for public workers on a monthly salary over €1,100. In the budget, the government outlines that the measure takes effect while the financial assistance programme lasts as an “exceptional measure for budgetary stability”.

Nº1 of article 117: Cuts to sickness and unemployment benefits – the PCP, PEV and BE requested assessment of this law, which rules that those on sickness benefit will contribute 5% towards social security while those on unemployment benefit will contribute 6%.

Article 186: Reduction of IRS brackets and deductions – the PCP, BE and PEV requested assessment of this law, which reduces from eight to five the IRS tax brackets and foresees a reduction in IRS deductions with professional training, health and education expenses.

Article 187: IRS surtax – the PCP, BE, PEV and ASJP requested scrutiny over this law as it will lead to further income cuts. The government of Passos Coelho created this 3.5% surtax levied on all workers earning over the annual national minimum salary.

Surtax retention – the Azores PS party is questioning the constitutionality of this law, which foresees that the 3.5% surtax is transferred to the central government and is not used to the benefit of the autonomous region.

Healthcare pay for Azores citizens in mainland Portugal – Azores PS finds it unconstitutional that the State Budget foresees the end of healthcare benefits for citizens from the Azores in the mainland.

No change to Portugal’s record unemployment rate

Eurostat||Portugal’s unemployment rate remained the third highest in Europe in November 2012 with a record 16.3%, announced Eurostat on Tuesday.

According to the European official statistical body, there have been practically no alterations to the country’s unemployment level when compared to October 2012, apart from a slight decrease of 0.3% in the jobless rate among those aged under 25 – at 38.7% in November.

Spain continues to be the country with the highest unemployment rate in Europe at 26.6%, followed by Greece at 26%.

Struggling to see the light at the end of the tunnel, despite PM’s message of hope

Divergence||Despite the controversy surrounding the constitutionality of the State Budget, which includes severe austerity measures, Prime Minister Pedro Passos Coelho says he can already “see the light at the end of the tunnel” and is confident that Portugal’s economy will grow by 2% in the next two years – something it was unable to achieve in the past 12 years.

Speaking during a festive event to mark the New Year at his official residence in São Bento, Lisbon, when traditional seasonal songs called As Janeiras were sang by folk groups last Sunday, Passos Coelho said he hoped the Portuguese “who are facing difficulties” could see that the country was not stuck in a “vicious cycle” but “preparing to exit this difficult period”.

He was clearly contesting President Cavaco Silva’s New Year’s message, in which he said the Portuguese economy was in a “recessive spiral”.

And to prove that Portugal was on the right path towards economic growth, the Prime Minister said this week that “sustainable growth was within our reach, therefore a better quality of life for the Portuguese was possible”.

Speaking during a conference about European funds (Common Strategic Framework 2014-2020) in Lisbon, Passos Coelho said: “In the next few years, we want to grow above the average of the last 12 years, a period where we didn’t lack funds but failed to achieve results and sustainability.”

He went on to say that the new National Strategic Reference Framework (QREN) should give priority to entrepreneurship, namely small and medium-sized enterprises, as employment was vital in the road towards economic growth.

“The recovery of the economy depends on investment, and banks that are well capitalised to fulfil their mission as one of the main sources of liquidity in the economy,” he said.

Meanwhile, the PSD vice-president and MP Teresa Leal Coelho stated: “We do not follow the President’s opinion about a recessive spiral. In fact, we absolutely disagree with that idea”.

Reiterating that the government growth estimates (-1%) are close to other official estimates (-2%), the MP believes that the President’s speech had a “very negative” impact, both “internally and externally”.

Concerning the President’s doubts regarding the constitutional legality of the 2013 State Budget, Leal Coelho says the government will “peacefully” wait on an answer from the Constitutional Court, which, if negative, “will make it even harder for the Government to exercise budgetary control”.
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