IMF says Portugal pays too many civil servants too much: report

Portugal should reduce the number of civil servants and cut their pay and pensions to save 4.0 billion euros ($5.2 billion), the IMF has recommended according to a report in a daily newspaper on Wednesday.

The report in the Jornal de negocios newspaper said that the recommendations were intended to help efforts by centre-right Prime Minister Pedro Passos Coelho, to reduce public spending in 2013 and 2014 by 4.0 billion euros by means of reforms to the state which he announced in October.

The government sought expert advice from the International Monetary Fund and from the World Bank on how to engineer such reforms.

The prime minister holds that there should be a national debate before such reforms are enacted.

Portugal is benefiting from a debt-rescue programme of 78 billion euros agreed in May 2011 with the IMF and European Union.

The IMF said in its report, drafted with the World Bank and the European Commission, that the total number of Portuguese civil servants should be reduced by about 20 percent, saving 2.7 billion euros.

The report recommended that those who were retained should have their pay cut by 7.0 percent, saving 760 million euros.

The recommendations immediately provoked a wave of criticism, notably from trades unions, and the government was quick to say that they amounted to “suggestions and not decisions.”

The head of the main CGTP trade union, Armenio Carlos, described the proposals as “an unprecedented attack” against the social role of the state.

The secretary general of the second union UGT, Joao Proenca, said: “The conclusions of the report are absolutely unacceptable.”

The IMF also suggested raising the retirement age and enabling the government to adjust the amount paid in pensions according to budgetary requirements.

The IMF said that in general terms the Portuguese social welfare system spent too much money and that unemployment benefits were too high and lasted for too long.

The proposals come against a background of radical and highly unpopular measures to cut spending, raise taxes and reform the economy in order to achieve targets under the bailout programme of reducing the public deficit to 5.0 percent of output in 2012 and to 4.5 percent in 2013.

The government has put in place a budget of unprecedented rigour for this year to reduce the deficit by 5.3 billion euros, of which 80 percent is in the form of tax rises.

The budget has already provoked a wave of protests. The conservative President Anibal Cavaco Silva, and the left-wing opposition, have asked the constitutional court to rule on the legality of some of the measures.