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TheStreet Open House

Bailed-out Portugal Plans Another $6.3B In Cuts

By BARRY HATTON

LISBON, Portugal (AP) â¿¿ Portugal plans to avoid the threat of needing another bailout by making another 4.8 billion euros ($6.3 billion) 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 said Friday.

Pedro Passos Coelho announced the proposals in a prime-time televised address to the nation. Portugal received a 78 billion 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 honor 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 said Portugal must show "our European partners that they have no reason to doubt our commitment" to repairing the country's public finances.

Failing to abide by the 2011 bailout agreement would be "disastrous" for Portugal's international credibility and would entail leaving the euro, which he said would be "catastrophic" for the country.

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.

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