Portugal to hit deficit targets despite court ruling - FitchTuesday 19 August 2014 14.51
Portugal is still expected to cut its budget deficit to 4% of economic output this year, even after the country's top court rejected some austerity measures, Fitch said today.
"The latest ruling reduces a key near-term risk to consolidation and keeps the sovereign on track to hit its fiscal targets this year," the ratings agency said in a statement.
Portugal's Constitutional Court last week rejected part of planned austerity measures in a blow to efforts by the government to cut its deficit to levels agreed with the European Union.
The country's top court rejected a pensions tax that was expected to bring in €372m in 2015, but approved a temporary reduction in civil servants' pay.
"The ruling reinforces our view that Portugal will hit its 2014 fiscal target of a general government deficit of 4% of GDP," Fitch said.
For 2015, the agency predicted that Lisbon will reduce its public deficit even further to 2.75%, despite "the capacity of the court to constrain fiscal policy".
Portugal is still struggling to rein in its finances after exiting a three-year international aid plan in May.
Lisbon plans to cut public expenditure to 43% of GDP in 2018, down from more than 48% last year, including by cutting jobs and salaries.