Austerity in Portugal

August 24, 2012

Portugal:  the new Argentina?

They’re giving it a shot.  Here’s the story as I understand it (but please send corrections if needed).  The Portuguese government is out of money:  no one will buy its bonds, so other than some transition financing provided by the European Union and IMF, it has no choice but to balance spending and tax revenue.  By necessity, and by agreement with the EU and IMF, at least part of this balancing must come from spending cuts.  One such cut was the temporary elimination of a one-month bonus traditionally paid to public sector workers in December.  In July, Portugal’s “Constitutional Court ruled that because the measure only applies to the public sector, it infringes basic principles of equity” (quoted from the BBC).  In other words:  it’s discrimination against government workers.  The Portuguese government is now scrambling to cover this unexpected obligation to its workers.  Some have suggested that the result will almost inevitably be to lay off more public sector workers, but perhaps they will find that unconstitutional as well.

There’s a nice review of Portugal’s situation here — also the links, esp this one.  Thanks to Gian Luca Clementi for the tip, perhaps in payback for Luis Cabral’s complaints about diving by Italian soccer players.

Update (Aug 25):  I should be clear, the political difficulties of managing a tough budget situation are universal.  I just ran across these NPR podcasts about Harrisburg.


One Response to “Austerity in Portugal”

  1. […] continues to push hard for this year’s “Call me Argentina” award.  You may recall that their constitutional court invalidated the government’s attempts to save money by […]

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