Portugal to Slash Public Sector Wages and Pensions to Help Make €3bn in Cuts

Portugal is to slash public sector wages and pensions in 2014 as the troubled country attempts to bounce back from its economic crisis.

The devastating news for government workers broke as Finance Minister Maria Luis Albuquerque presented the nation's 2014 budget on Tuesday.

The measures, designed to lead the country out of its bailout programme and return it to normal debt market financing, will see government employees earning more than €600 (£507, $810) a month having their pay cut by up to 12% as soon as next year.

"The budget's proposals are difficult, but decisive for our future," said Luis Albuquerque.

"It represents the government's determination to accomplish the adjustment programme in June and start a cycle of lasting consolidation and economic growth."

The plan, announced ahead of the completion of the latest review of Portugal's economy by officials from the European Union and International Monetary Fund, estimated that pension cuts could bring savings of €728m.

The budget also sees gross domestic product expanding 0.8% in 2014 - restoring positive economic growth to Portugal for the first time since 2010.

The government said it plans to make spending cuts worth €3.18bn out of a total budget consolidation effort of €3.9bn in 2014.

But the deficit may face challenges from the country's constitutional court, which has previously rejected some austerity measures and the government's opposition has pledged to contest new cuts in court.

The country's €78bn bailout formally ends in mid-2014 when Portugal should return to financing itself normally in bond markets, which it stopped doing in 2011 when its debt crisis first hit.

Portugal plans to issue €10.5bn in government bonds next year to help meet bond redemptions of €13.5bn and net financing needs of €11.6bn.