Portugal government seeks 10 pct public sector pension cut
LISBON, Sept 12 (Reuters) - Portugal's government proposed a bill on Thursday to cut public sector pensions and reduce a gaping hole in the system that is hampering efforts to shift the bailed-out country's finances onto a sustainable footing.
Pensions for retiring public servants of more than 600 euros a month will be slashed by around 10 percent on average from the start of 2014, according to the bill, which was approved at a cabinet meeting and will now be presented to parliament.
Public Administration Secretary Helder Rosalino told a news briefing that recalculating pensions and contributions would trim the deficit in the public pension system by 1.1 billion euros in 2014 from 4.4 billion euros ($5.9 billion) this year.
He also said the government proposed to amend a labour bill rejected last month by the Constitutional Court in a blow to the government's spending reduction strategy.
The pension and labour reforms are part of the centre-right coalition's efforts to cut state spending to meet the terms of Portugal's 78-billion euro EU/IMF bailout. The lenders' inspectors start their bailout review on Monday.
The pension bill aims to bring public sector pensions closer to those for private sector workers, and will affect about two-thirds of some 470,000 contributors to a state pension fund known as Caixa Geral de Aposentacoes, Rosalino said.
"We know it will generate a profound debate ... This reform is very important for the correction of deficit in the public pensions system, which is a serious problem for the sustainability of public finances," Rosalino said.
The government has a comfortable majority in parliament but some of its austerity measures have been successfully challenged by the opposition in courts, raising concerns it will be unable to complete its bailout programme by mid-2014 as planned.
The recently rejected bill would effectively have allowed state employees deemed surplus to requirements to be fired if they could not find another public sector job after a one-year period in which their wages would be sharply reduced.
As an alternative to dismissals, the government is now proposing a 40 percent wage cut for one year as workers undertake retraining, with a further cut lowering their original salaries by 60 percent if they cannot find a new job after that.
Rosalino said the proposed changes, which he said addressed the court's objections and should make up for the impact of the rejection, would still be discussed with the unions before going to parliament.
($1 = 0.7518 euros)
(Reporting by Andrei Khalip; Editing by Catherine Evans)