Foreign inspectors faced a dilemma as they began assessing Portugal's compliance with its financial bailout agreement today.
Portugal has abided by its commitments to slash spending in return for a €78 billion (£62bn) loan.
But falling tax revenue due to the resulting recession means that Portugal is likely to miss its budget deficit target.
That means bailout lenders may have to grant Portugal more time - a concession they have been unwilling to offer Greece.
The Treasury collected around €2 billion (£1.6bn) less than expected in tax revenue amid the country's third recession in four years, with the government predicting the economy to shrink by 3.3 per cent in 2012 and unemployment at a record 15.2 per cent.
The number of bankruptcies jumped 77 per cent between January and March this year.
The constitutional court has ruled out a plan to cut the Christmas and holiday bonuses of public employees and pensioners as unconstitutional and discriminatory.
The government could get around that prohibition by extending cuts to the private sector but that would spark fierce political opposition.
The bailout agreement was signed in May 2011 by the three main parties but that consensus could be unravelling.
The opposition Socialist Party says it won't back any more cuts because austerity is choking the economy.
Popular Party MPs, the junior members of the coalition government, have also balked at further cuts, as have grass-roots members of the ruling Social Democratic Party.
The austerity programme, including tax rises and pay and welfare cuts has also angered trade unions, bringing a series of strikes and protests.