Lawmakers gave outline approval on Friday to Portugal's 2014 budget, imposing another round of austerity on hard-pressed voters as the country works towards exiting its international bailout. The two parties of the centre-right ruling coalition, with 132 seats between them in the 230-seat parliament, voted in favour.
The other parties voted against the bill, including the main opposition Socialist party, which was in government when Portugal sought the bailout in April 2011. There were no abstentions. Several thousand pensioners and trade unionists gathered outside the parliament building to protest against public sector wage and pension cuts in the budget, which will mark a fourth consecutive year of fiscal belt-tightening to meet the terms of the bailout.
A small group that made its way to parliament's public gallery chanted "Government - out!" during the budget debate before being escorted out by police. A second parliamentary vote to approve the document in full is scheduled for November 26. But the bill will then almost certainly be reviewed by the country's Constitutional Court, which has rejected a number of government austerity measures over the past year and a half.
A similar outcome this time would pose risks to Lisbon's plans to exit the bailout in mid-2014. The government says the budget, which sets out 3.2 billion euros in spending cuts divided between state pensions, public sector wages, healthcare and education, will make the state's finances more sustainable and start reducing public debt from this year's projected peak of 127 pct of economic output.
"We are in the final stage of this (bailout) nightmare that converted Portugal into an intensive care patient," Deputy Prime Minister Paulo Portas told parliament. He criticised opposition "naysayers" for ignoring recent signs of economic recovery from Portugal's worst recession since the 1970s. The economy grew in the second quarter and the government expects the recovery to continue, although full-year growth, at a modest 0.8 percent, should only return next year.
Socialist leader Antonio Jose Seguro said the budget was "a programme of impoverishment, that only brings pain to the Portuguese, without sustainable adjustment to public finances." The government has acknowledged it may require a precautionary credit line to support its planned return to full market financing after the bailout ends. But Lisbon insists it will not need another bailout.
The bill, which sets the budget deficit at 4 percent of GDP as demanded by the lenders after this year's projected gap of 5.9 percent, will now be discussed in committees. Conservative President Anibal Cavaco Silva could send the budget to the constitutional court for checks before the end of the year. If he does not, the leftist opposition has said it will challenge the bill in any case, although that procedure would likely extend well into 2014. Prime Minister Pedro Passos Coelho said the government was convinced the bill was constitutional. "There is no clear violation of the constitution in any of the measures proposed. My conviction is that the government was within the boundaries of the constitutional interpretation that matches the reality we live in," he said.
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