Strong, capable and accepted leadership is critical

The Portuguese Constitutional Court has reviewed the 2013 national budget law and declared four revenue generating measures invalid because they violate the spirit of the country’s Constitution. The cancellation of these fiscal initiatives has an impact on the overall budget deficit, as they increase it by 0.8% to reach a deficit of around 6.3% of GDP this year. This is way above the amount agreed with Portugal’s external creditors. It projects a negative international image that contradicts the very serious stabilisation efforts the country has implemented so far.

The Court’s decision has created a major political crisis. The Prime-Minister met the President this evening to review possible options. But there aren't many, in the short term. The stabilisation process requires a long time horizon. The country has to be able to convince its external partners that as it pleads for more time and flexibility it also stays the reform course. It has also to show that it has a strong, capable and accepted leadership at the rudder…