Lisbon plans to increase the retirement age and make public sector employees work an extra hour daily as part of a package of new spending cuts needed to avoid bankruptcy and remain in the euro.
Lisbon plans to raise the retirement age and make public sector
employees work an extra hour daily as part of a package of new
spending cuts needed to avoid bankruptcy and retain the euro as its
Portuguese Prime Minister Pedro Passos Coelho unveiled the new austerity measures in an effort to meet the demands of international creditors, which envisions the redundancy of some 30,000 public sector jobs, together with the introduction of a 40-hour work week for civil servants and lifting the retirement age to 66.
The government also has plans to save money by spending less on pensions and healthcare.
The plan, which is slated to go into effect next year, would save 4.8 billion euro over three years.
Coelho believes the measures will prove Portugal’s political willingness to remain in the eurozone.
"With these measures, our European partners cannot doubt our commitment," Coelho said in a televised address on Friday.
"The choice is not between austerity and no austerity.” Not meeting the terms would cause Portugal to leave the euro and have catastrophic consequences for all, he added.
Austerity measures in Portugal, as elsewhere in the European Union, have proved very unpopular and have sparked large protests, but not on the same level of violence as witnessed in Greece and Italy.
Although the controversial proposal must still be debated with the opposition party and labor unions, the government has the authority to push it through.
Portugal received a 78-billion-euro bailout from the European Union, the European Central Bank and the International Monetary Fund in 2011, and now it must come through on pledges that it will cut back on government spending to keep the financial assistance flowing.
Deeper spending cuts, however, may prove a complicated juggling act for the government as unemployment remains stuck at nearly 18 per cent – a record high – and the economy is expected to contract for a third consecutive year in 2013.
Last month, the Portuguese Constitutional Court rejected more than 1 billion euro (US$1.3 billion) of proposed cuts, which included the cancellation of holiday bonuses for public workers. That forced the right-leaning government to search elsewhere for savings – though it has ruled out raising taxes.
"We will not raise taxes to correct the budgetary problem resulting from the Constitutional Court's decision," Coelho said.
"The way must be through the structural reduction of public spending." Meanwhile, Portugal's main Socialist opposition party has accused the government of inflicting excessive austerity on Portugal at the expense of the country’s lower income demographic groups.
Although the political opposition will certainly attempt to block the new cuts, it will be difficult for the courts to overrule them.
Average wages in the public sector are greater than in the private sector and its employees will now work eight-hour work days – about the same as in the private sector.
"This time the government may well escape getting the plan rejected by the court as it is now trying to follow the constitutional principle of equality, which brought down the measures last time," political analyst Antonio Costa Pinto told Reuters.
And while the plan will probably cause more social strife, protests are unlikely to alter the government's resolve in reducing the deficit, Costa Pinto said.
The center-right coalition government enjoys a comfortable majority in parliament.