Portugal plans to cut 30,000 civil service jobs and to raise the retirement age by one year to 66 as it tries to meet the terms of a bailout.
PM Pedro Passos Coelho said civil servants would also be required to work 40 hours a week instead of 35.
The proposals, which would be applied mostly from next year, would save 4.8 billion euros over three years, the prime minister said.
Austerity measures have proved deeply unpopular and have triggered large protests.
“With these measures, our European partners cannot doubt our commitment” to the bailout, Pedro Passos Coelho said in an address to the nation late on Friday.
Portugal’s PM Pedro Passos Coelho announced new austerity measures from next year that would save 4.8 billion euros over three years
“To hesitate now would harm the credibility that we have already won back,” he added.
Portugal received a 78 billion euro bailout from the EU, the European Central Bank (ECB) and the IMF in 2011.
Unemployment stands at nearly 18% – a record high – and the economy is expected to shrink for a third consecutive year in 2013.
Last month, the Portuguese Constitutional Court struck down more than 1 billion euros ($1.3 billion) of proposed cuts, which included the suspension of holiday bonuses for public sector workers and pensioners.
That forced the centre-right government to look elsewhere for savings – though it has ruled out raising taxes.
“We will not raise taxes to correct the budgetary problem resulting from the Constitutional Court’s decision,” Pedro Passos Coelho said.
“The way must be through the structural reduction of public spending.”
Portugal’s main Socialist opposition party has accused Pedro Passos Coelho of inflicting excessive austerity on Portugal in pursuit of an ideologically driven programme.