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Portugal to cut thousands of government jobs

Prime minister announces plans to make $6.3bn in budget cuts by raising retirement age and laying off 30,000 workers.

Last Modified: 04 May 2013 09:18
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Prime Minister Pedro Passos Coelho announced the cuts in a prime-time televised address to the nation [AP]

Portugal plans to avoid the threat of needing another bailout by making another $6.3bn in cuts over the next three years, with measures including raising the retirement age by one year to 66 and laying off around 30,000 government workers, the prime minister has said.

Pedro Passos Coelho announced the proposals on Friday in a prime-time televised address to the nation. Portugal received a $102bn euro rescue in 2011 after overspending, heavy debts and weak growth left it close to bankruptcy amid the eurozone's financial crisis.

Passos Coelho warned the country couldn't expect the rest of Europe to throw it another financial lifeline and said Portugal must honour the terms of the three-year bailout agreement, which demands deep cuts in spending.

Some wealthier northern European countries have shown signs of bailout fatigue as the continent's southern nations, like Portugal, Spain and Greece, have gone to them for help.

With the eurozone financial crisis appearing far from over amid a broad European economic slowdown, asking for more money could aggravate political problems.

“The idea that Europe will always come to our aid is wrong,'' Passos Coelho said.

He added Portugal must show “our European partners that they have no reason to doubt our commitment'' to repairing the country's public finances.

The center-right coalition government will likely have a hard time, however, selling its latest austerity measures to a disgruntled public.

Passos Coelho said he wants to give a full state pension to workers only when they reach 66, negotiate early retirement deals with government workers to get his target of 30,000 fewer staff, and increase the working hours of government employees to 40 hours from 35, the same as the private sector.

Many people blame the government's spending cuts and tax hikes for a recession that is forecast to continue for a third straight year in 2013.

Unemployment is at 17.5 percent, and the government predicts it will reach 18.5 percent next year.

Passos Coelho appealed for understanding. “People of Portugal, I know you are asking whether all the sacrifices will be worthwhile. I can assure you, they are,'' he said.

“The benefits [of austerity] will come,'' he said. "We cannot give up.'' 

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