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Portugal set to increase minimum wage despite concerns

Portuguese left-wing government announced it would decree a minimum wage boost, after employers and union groups failed to reach a deal. The increase could jeopardize the country's productivity, businesses warn.

The monthly minimum wage is to rise from the current 505 euros ($544) to 530 euros on January 1, Labor Minister Jose Vieira da Silva said on Tuesday.

The decision comes after bargaining between the unions and business representatives ended in failure.

The government is willing to discuss ways to help companies absorb the increase, according to the minister.

Portuguese businesses have pushed for a cut in their

social security contributions.

However, the authorities say that no immediate reduction is in the works.

"Workers have to earn more, but companies cannot be overloaded with charges of this magnitude, which they cannot absorb overnight," said Antonio Saraiva, head of Portugal's main business lobby group.

Reaching for 600 euro

Portugal requested a 78-billion-euro bailout in 2011 and only left the scheme in May 2014, with the previous conservative government pushing through harsh budget cuts.

The minimum wage was frozen at 485 euros until late 2014, before the center-right coalition raised it to its current level.

Last month, Saraiva's Portuguese Business Confederation warned the newly formed Socialist government that the further increase could undermine productivity gains made during the bailout period.

The Socialists,

supported by the Communist Party and the radical Left Bloc,

have campaigned on rolling back tax and pay cuts. They have also pledged to undo reductions on pensions and public services.

At the same time, the current Prime Minister Antonio Costa pledged to stick with European budget guidelines, and many companies fear that the policies might translate into higher taxes.

The government plans to gradually raise the minimum wage until it reaches 600 euros per month by 2019.

dj/jm (Reuters, LUSA)

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