Public sector employees are set to have their retirement age gradually raised from 60 to 65 and their sick pay reduced to fall into line with the private sector under Portuguese government plans to be considered in June. Other measures include an increase in sales taxes on tobacco and fuel.
With the maximum deficit of 3% allowed under the EU's Stability and Growth Pact, the move is a clear attempt to avoid the possibility of EU-level sanctions and a debt downgrade by credit rating agencies.
On 24 May Standard and Poor's decided to leave the Portuguese debt rating unchanged.
Earlier this month German Finance Minister Hans Eichel conceded that it would be difficult for Germany to respect the pact this year.