Portugal's new government on Wednesday moved ahead with a long-promised labour market reform, presenting a bill to cut severance payments and vowing to slash the number of senior public administration posts.
The reduction of severance compensation is part of the terms of a 78-billion euro bailout for Portugal, which was agreed with the European Union and International Monetary Fund in May, and is designed to boost competitiveness and spur economic growth.
Weak competitiveness, especially in its labour market, is one of Portugal's main problems that has held back economic growth even before the debt crisis.
According to the bill, which the centre-right coalition government hopes to push through parliament by the end of next month, total severance payments for new contracts will be reduced to 20 days from 30 days for each year worked. Under the terms of the bailout, half of the 20 remaining days are to be paid from a fund financed by employers to benefit workers who are laid off, and which the government expects to set up soon.
Luis Marques Guedes, the secretary of state for Cabinet matters, told a briefing the creation of the fund was still being discussed with employers and the unions.