The government of Singapore has approved significant wage cuts for workers in response to the regional economic recession.

The Deputy Prime Minister, Lee Hsien-loong, said the island state was facing its greatest challenge since independence and must take decisive action to regain competitiveness.

Civil servants and private sector workers will lose about fifteen per cent of their wages and pension payments next year as part of the plan to save more than six billion dollars.

Parliament is expected to approve the proposal on Wednesday despite complaints that workers are bearing too much of the burden.