Portugal Plans 30,000 Public Sector Layoffs in New Wave of Austerity Measures

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By Geetha Pillai | May 4, 2013 6:59 PM EST

Portugal's PM Passos Coelho makes his statement to the media in Lisbon

Portugal has announced massive layoffs and rise in retirement age in the public sector services as the country tries to get another instalment of bailout fund from international lenders.

The country is aiming to save €4.8bn ($6.3bn/£4bn) over three years with the budget cuts and changes will take effect from 2014.

The reforms require civil servants to work 40-hour weeks instead of 35, while the full pension age has been pushed back to 66 from the present 65.

"With these measures, our European partners cannot doubt our commitment [to the bailout]," said Prime Minister Pedro Passos Coelho in an address to the nation.

"To hesitate now would harm the credibility that we have already won back".

Lisbon is hoping to bring down its public deficit to 5.5% of the GDP this year, to 4% in 2014 and to 2.5% in 2015, well below the EU ceiling of 3%.

In 2011, Portugal has received €78bn bailout from the so-called troika of international lenders that include the European Union, the European Central Bank and the International Monetary Fund.

Resentment over the austerity measures is widespread in the country, which is reeling under the pressures of rising unemployment and shrinking growth. The Portuguese economy is expected to contract by 2.3% this year, while the jobless rate is forecast to surpass the record high of 18%.  

The main Socialist opposition party has blamed the government for applying excessive austerity on the country that has worsened the economic slowdown.

Earlier, the Portuguese Constitutional Court had overruled over €1bn of proposed budget cuts, which included suspension of holiday bonuses for public sector workers and pensioners.

Though the government has had to look for other sources for savings due to the court's ruling, the prime minister has ruled out any increase in taxes.  

"We will not raise taxes to correct the budgetary problem resulting from the Constitutional Court's decision," said Coelho while unveiling the medium-term programme.

"The way must be through the structural reduction of public spending". 

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