Portugal court foils gov't plan for spending cuts

LISBON, Portugal (AP) -- Portugal's Constitutional Court on Thursday foiled a government plan that would make it easier to lay off civil servants, delivering a setback to the bailed-out country's efforts to cut spending.

The government wants to place excess staff in retraining programs, on lower pay. After 18 months, the workers would be placed in different jobs or laid off. Currently, the law prohibits the layoff of government workers except under exceptional circumstances, such as gross misconduct.

But the Lisbon-based court ruled that the new measure is unconstitutional because it violates guarantees of job security and the principle of trust between the employer and employee. A government job has long been prized in Portugal, as it usually provides a job for life and a better pension than in the private sector.

The ruling is the second time the court has thwarted the government's spending plans. Just over a year ago, it struck down a measure to take away the Christmas and vacation bonuses of public employees and pensioners. The court said the measure was unconstitutional because it discriminated against a section of society.

The government is aiming to reduce its budget deficit to 4 percent of gross domestic product next year, from 6.4 percent in 2012. That target is a demand of creditors who granted Portugal a 78 billion euros ($103 billion) rescue in 2011 to help pay its debts.

The government's legal difficulties underline how hard it is for some of southern Europe's heavily-indebted countries, like Portugal, to overhaul long-standing labor rights.

The legal obstacles have thwarted some debt-reduction measures and helped prolong the financial crisis tormenting the 17 countries sharing the euro currency for more than three years.

The center-right coalition government made no immediate comment on the court's decision, but it will have to find the savings elsewhere as the country's bailout creditors demand cuts before releasing loan disbursements.

The government has abided by those demands despite complaints from opposition parties and trade unions that austerity is keeping Portugal in recession. The bailout creditors predict the economy will shrink 2.3 percent this year. The jobless rate is 16.4 percent.

Another law, increasing the working week of civil servants to 40 hours from 35, is due to come into force at the end of September, but unions have said they will ask the Constitutional Court to rule on its lawfulness.