Last week, the European Court of Human Rights (“ECHR”) released its decision in the combined cases of Da Conceição Mateus v. Portugal and Santos Januário v. Portugal. In this case, the Applicants, Antonio Augusto Da Conceição Mateus and Lino Jesus Santos Januário, were two Portuguese nationals who had seen a reduction in their pension payments. The Applicants’ state pensions were set up in 14 equal installments: one per month, plus additional holiday and Christmas payments in July and December. In December 2012, the Applicants’ holiday subsidies were reduced by approximately 24 percent. The pension cut was only to affect the holiday and Christmas payments, while their monthly pension remained the same, and was scheduled to last from 2012 to 2014. After 2014, the holiday and Christmas pensions would return to their normal rate.
The backdrop for backdrop for this story is Portugal’s financial crisis. In 2011, the Portuguese government negotiated an Economic Adjustment Programme for which it received 78 billion euros. As part of that deal, Portugal had to outline various spending cuts it would make, one of those cuts being a reduction in public sector pensions.
Interestingly, a challenge made to Portugal’s Constitutional Court found the cuts to be unconstitutional because there was no similar reduction in the private sector. But the ECHR upheld the cuts, in light of Portugal’s exceptional financial troubles. The Court said that Portugal appropriately balanced the interests of the individual against the general interest of the community. Also noting the limited duration of the pension cut, the Court said Portugal stayed within its boundaries to decide economic and social policy.
This is an interesting case because there are many individuals around the world facing the same struggle – whether their employer was the government or a private entity. It is a difficult balance, especially when the government was the employer, because any pension reduction could give rise to a takings claim. But I believe in this case Portugal was justified in reducing the pensions in order to address a domestic financial crisis. Assuming that both the holiday and Christmas pensions were reduced by the same amount (approximately 24 percent), the total reduction for the year would be around 3.5 percent. I understand that this could be a significant decrease to someone living on a fixed income, but I believe the cuts were warranted for the greater good.
What do you think? Should Portugal have been forced to pay the Applicants (and, presumably, all retired government employees) their full holiday and Christmas pensions? Was there a better way for Portugal to address their financial crisis? Are you worried this could become a slippery slope?
Source: European Court of Human Rights
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