News from Lisbon, the capital of Portugal, June 12—International rating agency Moody's pointed out in a report this Wednesday that although the Portuguese Constitutional Court recently revoked several deficit reduction measures in the 2014 national budget, Portugal can still successfully meet its 2014 deficit reduction target.
The Portuguese Constitutional Court ruled last month that three measures in the 2014 national budget were unconstitutional, including salary cuts for government employees earning more than 675 euros per month, involving a total amount of approximately 500 million euros. The government is currently seeking alternative solutions. Moody's Ratings noted that the impact of the Constitutional Court's ruling on the Portuguese economy is very limited, and the current budget execution in Portugal is much better than estimated.
Moody's Ratings also stated that Portugal's current economic performance is significantly better than the economic growth expectations set in October 2013 when the 2014 national budget was formulated, and the Portuguese government has strictly adhered to fiscal austerity policies. Therefore, the Portuguese government's 2014 fiscal deficit target of 4% can be successfully achieved.
Portugal successfully met its 2013 deficit reduction target, with the government deficit falling to 4.9%, which is better than the deficit reduction requirements set by the European Commission, the International Monetary Fund, and the European Central Bank. In May 2011, Portugal reached a bailout agreement with the European Commission, the International Monetary Fund, and the European Central Bank. Since then, Portugal has strictly implemented the stringent fiscal austerity requirements in the agreement, including measures such as reducing government fiscal expenditure, thereby obtaining 78 billion euros in aid.
