Portugal announces new austerity measures to comply with bailout agreement

Sunday 05 May 2013 11.56
Pedro Passos Coelho says the new measures will mean Portugal's European partners 'cannot doubt our commitment'
Pedro Passos Coelho says the new measures will mean Portugal's European partners 'cannot doubt our commitment'

Portuguese Prime Minister Pedro Passos Coelho has announced new austerity measures to comply with the terms of the country's EU/IMF bailout agreement.

The latest cuts are designed to save €4.8 billion over three years

Portugal plans to raise the retirement age by one year to 66.

It plans to make public sector employees work an extra hour per day.

These are part of the new spending cuts needed to slash the budget deficit to enable Portugal to meet its bailout targets.

The measures, which will be applied mostly from next year, also include voluntary redundancy programmes for 30,000 of the country's 600,000 public sector workers.

"With these measures, our European partners cannot doubt our commitment," Prime Minister Coelho said in a televised address.

"The choice is not between austerity and no austerity. Not meeting the terms would cause us to leave the euro and have catastrophic consequences for all."

The plan is still to be debated with the opposition, unions and employers, but the government has the power to force it through.

Some savings will also come from a reduction in overtime pay in the public sector and less spending on pensions and healthcare.

The European Commission, which has long insisted on permanent spending cuts, warned earlier that new measures could run into the same problems that led the Constitutional Court to reject some previous austerity steps, and said that could provoke an even deeper recession.

Last month, the court threw out €1.3 billion of measures from this year's total austerity package.

The measures were worth €5 billion and forced the government to come up with new cuts and other alternatives to keep Lisbon's EU/IMF bailout on track.