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Government's Plan to Raid Public Pensions 'Illegal,' says Court

Victory for retired pensioners and workers in Portugal as austerity proposal shot down

Jon Queally, staff writer

The pattern of seizing workers' retirements by slashing pension benefits or raiding the funds in order to reduce budget deficits has been seen across Europe and in the U.S.

In states like Illinois and large cities like Detroit in the U.S., as well as in countries like Greece, Spain, Portugal, the U.K., and elsewhere, pension agreements have been treated as dispensible contracts in the wake of the financial crisis that took hold in 2008. Even as wealthy individuals and corporations remain insulated from higher taxes, governments have increasingly looked at gutting public worker pensions as a way to pay off debt or reduce annual deficits.

But in Portugal on Thursday, where the government has imposed draconian austerity policies in order to please the "Troika"—the European Union, International Monetary Fund and European Central Bank—a court ruled that a new government ploy to cut pension payments to retired workers would be "illegal" as it would threaten the "principle of trust" on which such agreements are based.

As Euronews reports:

Demonstrations appears to have paid off in Portugal, where the constitutional court ruled unanimously that one of the government’s key austerity policies was illegal.

The government had planned to slash public sector pensions over 600 euros a month by 10%, but the court ruled that would constitute a “violation of trust”.

The decision represents a significant reverse for the centre-right government’s 2014 austerity budget. It would have saved some 388 million euros, or nearly 10% of the 3.9 billion euro public spending cuts the government wants to introduce.

Other ways of making savings must now be sought, with the government warning it may have no alternative but to raise taxes.

However the troika helping Portugal reduce its debt note that rises would threaten economic recovery. One of the current governments coalition partners, the Conservatives, have already ruled out any such hike.


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