The Eurozone is facing a new crisis as Portugal braces itself for a wave of deep spending cuts across its public sector.

It comes after the top court there struck down part of the budget designed to meet Troika targets as unconstitutional.

Addressing the nation Prime Minister Pedro Passos-Coelho said the cuts needed to be introduced to avoid another bailout.

In a televised address to the nation yesterday he said there would be no new tax hikes this year but that measures will be taken to "contain public spending in the areas of social security, health and education".

However no details of the cuts were given.

€4 billion worth of cuts

The Portuguese government has been trying to cut public spending by €4 billion by 2015.

The European Commission has welcomed the Portugese government commitment to meeting spending targets and says it will work to minimise the impact of the cuts on Portugal's people.

On Friday the Constitutional Court ruled that several measures in the budget were unlawful. These include the scrapping of a 14th-month salary for civil servants and retirees as well as cuts to unemployment and sickness benefits.