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Portugal to hit deficit targets despite court ruling: Fitch

AFP
Pensioners protest in front of the Portuguese parliament in Lisbon on January 22, 2014 against further declines in their state pensions
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Pensioners protest in front of the Portuguese parliament in Lisbon on January 22, 2014 against further declines in their state pensions (AFP Photo/Patricia de Melo Moreira)

Lisbon (AFP) - Portugal is still expected to cut its budget deficit to four percent of economic output this year, even after the country's top court rejected some austerity measures, Fitch said on Tuesday.

"The latest ruling ... reduces a key near-term risk to consolidation and keeps the sovereign on track to hit its fiscal targets this year," said the ratings agency 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 pensions tax that was expected to bring in 372 million euros ($497 million) 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 percent of GDP," or gross domestic product, said Fitch.

In 2015, the agency predicted Lisbon will reduce its public deficit even further to 2.75 percent, 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 percent of GDP in 2018, down from more than 48 percent last year, including by cutting jobs and salaries.

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