The government in Lisbon received another firm "no" from the country's Constitutional Court on Thursday when judges ruled one of its austerity measures unconstitutional. Rather than laying off more public sector employees immediately, the bill aimed to transition workers into other jobs by first reducing their pay and then letting them go after roughly one year if they hadn't found new employment. The measure would have saved the government some 170 million euros ($225 million).

"The court decided to deem the norms [of the bill] unconstitutional…due to the violation of guarantees of secure employment," a Constitutional Court judge read in a statement on Thursday.

Two years ago, the International Monetary Fund (IMF), the European Union (EU), and the European Central Bank (ECB) approved a 78 billion euro loan when the country faced bankruptcy. According to the terms of an agreement, Lisbon must reduce its budget deficit to 2.5 percent of the GDP by 2015 in order to continue receiving bailout funds.

The Portuguese government under Prime Minister Pedro Passos Coelho seeks to trim 4.7 billion euros this year in order to reach its 2013 goal of reducing a budget deficit worth 5.5 percent of the GDP.

Court dismisses austerity plan again

The Constitutional Court's decision on Thursday was the second time it had deemed an austerity measure unconstitutional. Earlier this year, the country's top judges stopped the government from reducing holiday bonuses and other public sector perks, ruling that it would be unfair to single out civil servants for reductions in benefits in order to meet the terms of the bailout.

During its two-year recession, the center-right government has increased taxes, cut tens of thousands of public sector jobs and increased the work week from 35 to 40 hours. Joblessness remains high even though the unemployment rate dropped in August to 16.4 percent after topping 17.5 percent in the first quarter of this year.

While international lenders have praised Lisbon's efforts, its austerity program has sparked numerous protests. The increased pressure on politicians from the widespread discontent pushed the center-right coalition government into a political crisis this summer, with several ministers attempting to resign. Lawmakers have since ensured political stability, but remain uncertain of how to meet the demands of lenders.

kms/dr (AP, AFP, Reuters)