Portugal’s President & Prime Minister Clash Over Austerity Budget

January 2, 2013Portugalby EW News Desk Team

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Portugal’s President Aníbal Cavaco Silva has appealed to the nation's highest court to rule on the legality of the country’s 2013 budget, after he expressed doubt over the budget's fairness just a day after he personally signed the budget bill into law together with Prime Minister Pedro Passos Coelho.

Cavaco Silva, whose role is largely ceremonial despite theoretically possessing a wide range of constitutional powers, said that he was concerned about the budget's "distribution of sacrifices” and called for an end to the "recessionary spiral" the country is undergoing.

“The execution of this budget will bring about lower income for citizens through higher taxes and lower social payments. Everyone will be affected, but some more than others, which raises doubts on the fairness of redistribution efforts," cautioned Cavaco Silva, as cited by AFP.

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“By my own initiative, the constitutional court will be called on to decide on the conformity of the 2013 state budget,” Cavaco Silva said, adding that he had only decided to sign the budget into law, despite his concerns, because of the “extremely negative consequences” that vetoing it would have for Portugal and its international lenders.

The European Commission, European Central Bank and the International Monetary Fund in September agreed to relax the terms of Portugal’s 78 billion euro bailout, after praising the government for its commitment to raising taxes and cutting spending.

Though the bailout is crucial for Portugal’s economic health, Cavaco Silva warned that fiscal austerity may lead to declining output and lower tax revenue, causing a “vicious circle” in the process.

“We need to regain the trust of the Portuguese," Cavaco Silva said in a televised speech. "It's not enough just to regain the confidence of our foreign creditors. We must work to unite the Portuguese and not divide them."

Related: Portugal Cancels Four Public Holidays To Boost Economy

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By asking the court to review the budget, Cavaco Silva runs the risk of angering his fellow Social Democratic Party member, Prime Minister Pedro Passos Coelho, warned one Portuguese newspaper on Wednesday.

"An eventual disavowal ... would inevitably destabilise the executive branch," Diario de Noticias said in an editorial.

But regardless of Passos Coelho’s reaction, University of Lisbon political analyst António Costa Pinto told the Wall Street Journal that the government should "easily make the necessary adjustments to the budget,” in the event that the constitutional court overturns some of its measures.

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