Portugal's prime minister said he will address the nation Sunday over a crisis triggered when the country's highest court ruled some of the unpopular pay cuts in this year's budget are unlawful, depriving the government of about 1.4 billion euros ($1.8 billion) of expected revenue.

Pedro Passos Coelho will speak after his government said in a statement that the position taken by the Constitutional Court "places the country in serious difficulties in meeting obligations to which it is committed internationally and also the budgetary goals it must meet."

Passos Coelho met with President Anibal Cavaco Silva late Saturday after holding an emergency Cabinet meeting.

The government accepted the judges' decision, "but disagreed with it," government spokesman Luis Marques Guedes said. He said the ruling carries risks which Portuguese citizens should be made aware of.

The court's decision Friday delivered a setback to the austerity strategy agreed between the government and foreign creditors who lent Portugal 78 billion euros ($101.5 billion) in a bailout two years ago.

The ruling, delivered by a panel of 13 judges, said budget measures which cut holiday pay for government workers and pensioners, and other austerity cutbacks which reduce unemployment and sickness benefits, were unconstitutional.

The court's reasoning was that the measures singled out public workers and pensioners and hence were contrary to equality guarantees written into Portugal's constitution. Private sector workers aren't subject to the measures.

Esteban Gonzalez Pons of neighboring Spain's ruling Popular Party was at pains to say that "Spain is not in the situation as Portugal," because austerity efforts had been distributed more evenly and "everyone has had to make sacrifices."

Spain's main trade unions in January lodged an appeal before the Constitutional Court to similar cutbacks ushered through parliament by the government of Prime Minister Mariano Rajoy.


Harold Heckle in Madrid contributed to this report.