The highest court in Portugal ruled that some of the austerity measures to be employed by the government to curtail deficits are not constitutional. In reaction, the central government said it would accelerate some cuts, as Portugal’s economy slips deeper into recession and unemployment reaches levels unprecedented in recent times.
If the court can block much of the austerity actions, Portugal’s cost to raise money may skyrocket, which would put the future of its bailout by the European Central Bank, European Union and International Monetary Fund in danger.
With Portugal’s main court rejecting cost-cutting measures which are central to financial aid, the country’s already faltering austerity program has been thrown into further doubt, adding to pressure on the euro zone, analysts told CNBC.
“Fiscal austerity in Portugal is failing,” Nick Spiro, head of Spiro Sovereign Strategy, told CNBC. “Portugal’s 2011 bailout program went off track some time ago. If it were not for the troika’s leniency and the dramatic rally in Portuguese debt, the program would have already failed by now.”