The set of austerity measures adopted in Portugal include cuts in public employees’ salaries and in social benefits. Some tax changes have also been introduced which will primarily affect workers.
General information and figures
The set of austerity measures adopted in Portugal include cuts in public employees’ salaries and in social benefits. Some tax changes have also been introduced which will primarily affect workers.
Unemployment rate (June 2010): 11%
GDP (bn euro – 2010): 170.75
General Government debt (2009 - % GDP): 76.1
Public deficit (2009 - % GDP): 9.3
Source: Eurostat
Public Employees
In 2005, the retirement age in the public sector was 60. It has increased steadily since then and is now set at 65 years of age and a working period of 40 years.
Salary cuts for workers earning above 1 500 € gross per month have been introduced in 2010/2011. This cut varies between 3.5% and 10%, with the average standing at 5%. All public employees will be affected, including workers of the State Entrepreneurial Sector – publicly owned companies and regional or local public enterprises.
Salaries below 1500 € have been frozen (period 2010-2013).
Career development has been frozen.
A recruitment embargo in Public Administration has also been imposed.
[It is expected that these measures will reduce public expenditure by 0.8% of the GDP, or by €1.36 billion.]
Cuts in social benefits
€1.583 billion cuts in Social Security and the National Health Service (0.9% of the GDP) and other sectors, namely public transport.
The 2011 budget for unemployment benefits is down by €157 million €, compared to 2010,
The cuts in children’s allowances will hit 1.4 million children and young people (79% of the total number of children and young people). The budget for unemployment benefits is reduced from €2247.91m in 2010 to €2091.71m in 2011 (a reduction of 156.2m).
Pension reforms
Freezing of pensions both in the private and public sector and of social allowances in 2011 (inflation rate will rise by over 2.2%, while pensions and social allowances will be frozen).
Cuts in public services, transfers and public investments
€916 million cuts (0.5% of the GDP) in Education and Higher Education. The budget for the fight against poverty (calculated as the transfer from the general budget to Social Security System) is reduced from €7729.9m in 2010 to €6742.6m in 2011 (a reduction of €984.3m).
Tax changes
Tax increases will mostly affect workers (the normal VAT rate will go up from 21% to 23%)
Cuts in tax benefits and increases in income tax have also been introduced.
The government intends to increase its tax revenue in 1% of the GDP (1.7 billion €).