Portugal to slash public sector posts in cost cutting move

(LISBON) - Portugal unveiled Thursday plans for a slimmed-down central administration with the axing of 27 percent of directors' posts as creditors met to ensure the country's bailout rules were being met.

"We urgently need to reduce costs and make the state more effective," to "adjust the size of the state to its financial capacity," public administration chief Helder Rosalino told a press conference following a cabinet meeting.

The plan, which proposes a saving of 100 million euros next year, includes the axing of 1,700 managerial posts from the state administration and 137 public companies.

By getting rid of positions and merging public institutions the government plans to reduce the number of state organisations by 38 percent.

Portugal agreed to cuts of at least 15 percent across its departments as part of a financial aid package put together by the European Union and the International Monetary Fund in May.

In exchange for a loan of 78 billion euros, the government must implement strict measures over three years to reduce its public deficit from 9.1 percent of GDP last year to three percent in 2013.

Experts from the European Commission, the European Central Bank and the International Monetary Union began Thursday a six-day mission to ensure Portugal's 2012 budget meets with the bailout conditions.

The IMF said in a report published this week that the government should tighten spending controls and reduce waste.

It said that so far the country does not need an expanded bailout like embattled Greece, but that pressures remained on the programme.

Since taking office in June, the government of Prime Minister Pedro Passos Coelho has been forced to offset a two billion euro budget black hole, notably by a special revenue tax and an increase in the value added tax on electricity and gas.