Portuguese Socialists challenge 2013 budget in court

LISBON Fri Jan 4, 2013 11:49am EST

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LISBON (Reuters) - Lawmakers from Portugal's opposition Socialist Party challenged parts of the 2013 budget in the Constitutional Court on Friday, a move that could hamper government efforts to meet the terms of the country's bailout.

Some 50 of the Socialists' 74 lawmakers, including party leader Antonio Jose Seguro, signed the petition sent to the court, arguing cuts to pensions, civil servants' salaries and welfare benefits undermine workers basic rights.

Constitutional experts said the 13-judge court, which rules according to a simple majority, could decide either way on the budget measures, which aim to save the government about 1.6 billion euros, or 1 percent of gross domestic product.

The cuts are at the core of a budget aiming to reduce the fiscal deficit to 4.5 percent of GDP this year, from a targeted 5 percent in 2012, under the terms of a 78-billion-euro bailout from the European Union and International Monetary Fund in 2011.

"The court will be under great pressure given the complicated situation that the country is in," said Pedro Bacelar de Vasconcelos, a professor at the University of Minho Law school in Braga. "The judges should not be pondering these decisions which are political. They are not elected."

The court ruled against the government last year over a measure to cut holiday bonus payments to civil servants, forcing it to find alternative belt-tightening measures six months after its budget came into effect. It has said it has no time frame for a decision regarding the 2013 budget but experts said it may reach a conclusion in a few weeks.

"We are certain the court will bring good news to the people who have been treated unjustly by this budget," Socialist lawmaker Alberto Costa told journalists.

President Anibal Cavaco Silva has also asked the court to check the budget's legality, and whether tax increases are fairly distributed. The budget introduces a 3.5 percent "solidarity tax" on income and lowers income tax thresholds.

The measures pile further misery on Portugal, where unemployment has reached record highs of 16 percent and the government expects the economy to shrink by 1 percent in 2013, its third consecutive year of contraction.

Portugal's public debt will peak in 2013 at 124 percent of GDP, according to the International Monetary Fund.

The government says its budget measures are constitutional.

The Socialist Party was in government when Portugal first requested the bailout. Last year only 18 Socialist lawmakers, but not the party leaders, signed the successful petition to the court over bonus payments.

More challenges to the budget are likely to be presented to the court by the Left Bloc and the Communist Party.

(Reporting By Daniel Alvarenga, Sergio Goncalves and Axel Bugge; Editing by Catherine Evans and Jason Webb)

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