IMF report on how to cut €4 billion

news: IMF report on how to cut €4 billion

By TIAGO PRATA [email protected]

A report from the International Monetary Fund (IMF) sent to the Portuguese government and publicly disclosed by the newspaper Jornal de Negócios proposes an array of options for the government to cut €4 billion on public spending from 2014.

The document mentions that there are professions (police, army, teachers, doctors and judges) who are “overprivileged”, suggesting even more pension cuts and lay-offs for teachers.

The report is dated from December, when it was delivered to the government, and contains several proposed austerity measures, although only classified as advisory/consultative. Most of it is focused on expenses in regards to civil servants and retirees, an area in which the government has a bigger leverage to make changes and where it could save more.

The lion’s share of the cut is on a reduction of civil servants by 10 to 20%, which would save €2.7 billion alone, more than half the total value of the State reformation currently on the government’s agenda. Next, there are the salary cuts for civil servants. Cuts from 3 to 7% on the government’s payroll could represent yearly savings of around €760 million, while cuts of 30% on workers’ allowances would save the government €300 million.

In the report, to which the World Bank and the European Commission also contributed, the IMF highlights that Portugal should now look for a social consensus about which measures to adopt.

Said consensus may prove hard to achieve, according to early reactions to the report. Major trade union federations CGTP and UGT manifested against the proposed measures. While CGTP promised a reaction on the streets, UGT criticised the report, claiming it is “unacceptable to destroy people’s lives”. Teachers’ associations FNE and FENPROF, the Armed Forces, National Health System (SNS) creator António Arnaut and users’ commissions, and especially opposition party PS, heavily criticised the report, using dramatic expressions such as “an unprecedented attack”, “education system demolition”, “subversion of the constitution and democracy”, and “another blow from the government in the social and political consensus”.

The main problems and proposals focused on in the report are:

Overprivileged jobs: Civil servants’ salaries are “relatively high” and benefit “low-qualified” workers, because wage increase is based on seniority and not qualification, when it should be the other way around. Doctors and judges have the most privileged salary systems.

Expensive pensions: Several options are proposed, such as maintaining the cut on holiday and Christmas bonuses, as well as 15% cuts on pensions above a non specified amount. The government could also change the way pensions are calculated, amounting to a 20% cut on every pension. The report considers the “welfare system still too expensive and unfair, especially for the young”.

Laying off teachers: Putting between 30,000 and 50,000 workers on mobility programmes, and making them work more hours.

Increasing user fees: on health services, even more for non-essential healthcare services, as well as changing the exemption system.

Increasing tuition: for students in public universities, and restructuring compulsory education rules.

Downsizing police forces: Reducing the number of police officers (one of the densest in Europe) and changing the privilege system.