As reported late on Friday, just as the market closed, the Portuguese constitutional court decided that several provisions of the country's 2013 budget were not constitutional. According to the high court, cuts in wages and pensions of public employees were unfair (there's that word again) because they targeted only the public sector. The court rejected plans to cut one of the 14 paychecks that public workers usually get each year and to slash 6.4% from pensions for retirees. This coincided with the government warning that the court's decision would put into question the country's ability to fulfill its €78 billion international bailout program, which in turn would send bondholders of Portuguese sovereign debt scrambling for the exits as suddenly the country may find itself in the ECB's "dunce" corner, with Draghi preparing to pull a "Berlusconi" on a government which can't even whip its judicial branch in line. However, of more immediate concern is how will the government now plug a hole of up to €1.3 billion in its €5.3 billion 2013 budget. A solution has, luckily, presented itself: bypass the unconstitutional provisions by paying government workers not in cash, but in government bills!

From the WSJ:

The Portuguese government is considering a plan to pay public workers and pensioners one month of their salary in treasury bills rather than cash after a high court ruled out wage cuts, a person familiar with the situation said Sunday. "This is one of the ideas being considered," the person said. By paying one month of salary in T-bills to public workers and pensioners, the government would save an estimated €1.1 billion in expenses, narrowing the budget gap significantly.

Incidentally, this plan makes perfect sense: with every central bank openly monetizing its debt, it has effectively made debt and cash equivalent.

Now if only Portuguese public workers had access to the same shadow transformation pathways and government bond repo collateralization opportunities afforded to the big banks, then every bill thus obtained would be able to serve as a source of nearly infinite rehypothecation potential, and thus, a DIY fractional reserve banking system provided to every individual.

Coming next: the full convertibility of Spanish Spiderman towels backed by the full faith and credit of the Rajoy kickback scandal, and fully convertible into chorizo.

All joking aside, the fact that this absurd option is even being contemplated shows just how deep into the rabbit hole event horizon the modern completely insolvent financial system has traversed.