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Bailed-out Portugal to unveil new budget cuts worth $1.6 billion next week

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Portuguese Prime Minister Pedro Passos Coelho gestures during a news conference at the Sao Bento palace in Lisbon Friday, April 12, 2013. The European Union finance ministers meeting in Dublin Friday, will consider extending the repayment schedules on bailout loans previously given to Ireland and Portugal. The situation in Portugal was complicated this month when the country's constitutional court struck down parts of the government's austerity program, making it necessary for the government to look for other ways to meet its deficit reduction targets. (AP Photo/Armando Franca)The Associated Press

Portugal's prime minister says his government will announce new spending cuts worth 1.2 billion euros ($1.6 billion) next week to compensate for austerity measures disallowed by a court and to unblock access to its bailout funds.

The Constitutional Court last week declared some of this year's tax hikes unlawful, leaving the government with a 1.3-billion-euro hole in its 2013 budget.

Foreign creditors who lent Portugal 78 billion euros in 2011 consequently froze a scheduled disbursement of 2 billion euros until the government comes up with alternative measures. The government needs that money to pay expenses such as salaries and pensions.

Prime Minister Pedro Passos Coelho told reporters Friday that his Cabinet will next week announce a 600-million-euro reduction in the government budget and prune the same amount from public services.