Portugal cuts compensation payments for sacked workers

Portuguese Prime Minister Pedro Passos Coelho on Wednesday confirmed that his government will reduce the legal severance pay of workers who are dismissed to 12 days per year in service from 20 days at present.

The Portuguese leader said the move came in response to a request from the troika — the International Monetary Fund, the European Union and the European Central Bank — during a recent visit to monitor progress on the program the government has embarked on in exchange for a bailout of 78 billion euros.

Passos Coelho said the two options were to cut compensation for workers who are laid off to eight days or 12 days, adding that his government had opted for the latter as the “least polemical” solution.

The government insisted that 12 days severance pay reflected the average in Europe, but the country’s two main labor unions, the CGTP and the UGT, begged to disagree.

Business groups welcomed the move, but insisted the main affliction lay in the shrinking spending power of consumers in an economy that is in a deep recession.

Unemployment in Portugal stood at a euro-era record high of 15.8 percent at the end of September and is expected to move above 16 percent next year.

Consumers have also had to bear tax hikes and salary cuts as part of the government’s austerity drive.