Page last updated at 11:25 GMT, Wednesday, 4 March 2009

Puerto Rico unveils job cuts plan

Luis Fortuno (file image)
Luis Fortuno faces a protest by workers angry at the measures

Puerto Rico's governor has unveiled plans to cut 30,000 public sector jobs and raise taxes to confront a "bankrupt government" in the US territory.

Luis Fortuno said he aimed to slash spending by $2bn (£1.4bn) and that layoffs would start in July.

He also announced plans to jump-start the economy, which has been in recession for three years.

He said failure to act would do massive damage to the economy, which could take a decade to recover.

The proposed job cuts - equivalent to 14% of the public work force - will not include police officers and teachers.

"The government is too big and spends too much," Mr Fortuno said in a half-hour televised address. "Simply, the government has to be minimised."

He added: "We all must confront the reality of a bankrupt government and work together to return progress, opportunity and your future to you.

"The government may be bankrupt, but Puerto Rico is not."

Tax reforms

About 218,000 people - or 21% of Puerto Rico's work force - work for the government, making it the self-governing territory's main employer.

Economic experts have been advising Puerto Rico to cut its public payroll for years. It currently has a budget deficit of $3.2bn (£2.3bn).

Mr Fortuno said wages and benefits would be frozen during the next two years.

He also said he would impose a two-year ban on tax credits to many businesses, and implement a two-year 5% tax on banks, corporations, insurance companies and co-operatives, as well as on individuals earning $100,000 annually.

Taxes will also be increased on cigarettes and alcohol to pay for a healthcare programme for the poor.

He said the measures were necessary despite about $5bn (£3.5bn) earmarked for Puerto Rico in President Barack Obama's $787bn (£548bn) stimulus package over the next two years.

Political opponents and union leaders said they would fight Mr Fortuno's plans, and a public protest is planned for Friday.

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