Fitch hails Portuguese court's decision to approve spending cuts

 Fitch ratings agency praised Tuesday the Portuguese Constitutional Court's decision to partially approve spending cuts, pointing out that this will enable the government to meet its budgetary targets.
"The latest ruling by Portugal's constitutional court partially approving expenditure measures reduces a key near-term risk to consolidation and keeps the sovereign on track to hit its fiscal targets this year," Fitch Ratings said in a statement.
"It limits future fiscal flexibility, although the consequences for debt reduction will partly depend on whether Portugal can sustain its return to economic growth," the statement said.
Last Thursday, Portugal's Constitutional Court approved salary cuts for public sector workers in 2014 and 2015, as part of the government austerity measures submitted by President Anibal Cavaco Silva and Prime Minister Pedro Passos Coelho on July 31.
"The ruling reinforces our view that Portugal will hit its 2014 fiscal target of a general government deficit of 4 percent of GDP, down from 4.5 percent last year," Fitch said.
The rating agency said that they forecast a further reduction to 2.7 percent in 2015, when the Portuguese government plans another sharp reduction in expenditure, though it is above the government's 2.5-percent target due to more conservative growth assumptions.
"This view is also supported by Portugal's solid fiscal performance so far in 2014 and by the authorities' track record of finding offsetting measures to previous rulings," it said.
Meanwhile, Portugal's Constitutional Court rejected Thursday a government proposal to public sector employee wages between 2016 and 2018 and to impose a tax on public sector pensions.