Passos Coelho's announcement is a reminder of the constraints of EU membership. Europe has created supranational institutions such as the European Commission and the European Central Bank, which are currently pushing member states to apply austerity measures. Yet, EU members preserve their national institutions, such as national parliaments and constitutional courts, which can derail agreements made between governments and EU institutions. The Greek government's constant struggle to get economic reforms approved in the parliament, and the recent decision by the Portuguese Constitutional Court, are examples of this phenomenon.
The Portuguese court declared that the removal of extra summer pay for civil servants and pensioners and cuts in unemployment and sickness benefits, measures included in the 2013 budget, were illegal. According to the court, the measures violated the principle of equality. The court made a similar ruling in July 2012 when it annulled the government's decision to slash Christmas and summer holiday bonuses for public officials. The Constitutional Court judges said the measures were unfair because they were not also applied in the private sector.
The new round of spending cuts will take effect in a deteriorating social environment. According to Eurostat, the Portuguese economy contracted by 3.2 percent in 2012, and the government projects a contraction of at least 2.3 percent this year. Moreover, unemployment is expected to reach 19 percent in 2013, up from 8.5 percent in 2008, making Portugal the country with the third-highest unemployment rate in the European Union after Spain and Greece.
One of the main results of the economic crisis in Portugal is the growth of emigration. Between 2011 and 2012, some 200,000 people — foreigners and citizens — left Portugal, a country of 10.6 million. Many left without clear job offers abroad, hoping to find a job in the United Kingdom, France or Switzerland, and sometimes even in former Portuguese colonies such as Brazil and Angola. As the European crisis deepens, immigration is creating tensions in receiving countries.
The Constitutional Court's ruling will likely weaken Passos Coelho's government, which was already under significant political and social pressure. Passos Coelho's Social Democratic Party came to power after winning the country's June 2011 general elections. During the first months of his government, Passos Coelho enjoyed a high level of political stability. The opposition was weak and divided after it requested a bailout in mid-2011 and was voted out of office later that year. Passos Coelho also managed to win the support of some of the country's moderate trade unions, reducing the frequency of strikes. Finally, Lisbon's new government got help from the European Union and the International Monetary Fund, which agreed to soften the country's financial targets
Despite the Passos Coelho government's promising beginning, social and political unrest climbed in late 2012 as the economic situation worsened. The opposition has begun to regain lost ground, and both the unions and the unemployed have stepped up protests against the government. In November 2012, the country's main unions organized a general strike against the 2013 budget, which included 4 billion euros in spending cuts. In March, several thousand people took to the streets in Lisbon, Porto and other major Portuguese cities to protest the austerity measures. On April 3, the main opposition Socialists and two smaller left-wing parties issued a no-confidence vote against the government. The ruling coalition holds a comfortable majority so the vote was largely symbolic, but it highlighted the growing political crisis in the country.
Finally, the Portuguese Constitutional Court's ruling could have consequences beyond Portugal. In Spain, the civil service union, CSI-F, warned the government of Spanish Prime Minister Mariano Rajoy to "take note" of what happened in Portugal and return public employees' Christmas bonuses, which were canceled in summer 2012. The union has brought the issue of bonuses to the Spanish judiciary. Moreover, Cetarsa, a publicly owned company, brought doubts about the constitutionality of the measure before the Spanish Constitutional Court. The court's decision will affect the entire workforce in the public administration and public enterprises, some 875,000 employees.
Portugal and its lenders are likely to reach an agreement to try to soften the impact of the austerity measures on the Portuguese population. However, Lisbon and Brussels are running out of ideas. The troika (comprising the European Commission, the European Central Bank and the International Monetary Fund) already agreed to soften Portugal's deficit goals early this year (from the original target of 4.5 percent of gross domestic product to a new goal of 5.5 percent for this year), and there are currently discussions about extending the maturity of Portugal's bailout loans. But the European crisis long ago ceased to be purely economic, and even if Lisbon and Brussels manage to agree on a softer deficit, the social and political aspects of the crisis will remain unaddressed.
