* Retirement age to be raised to 67 from 65
* Unions protest steps
* Raising retirement age could save 4 bln euros per year
AMSTERDAM, Oct 16 (Reuters) - The Dutch government agreed on Friday to raise the pension retirement age by two years to 67 in an effort to improve state finances and cope with a shortage of workers in a widely-expected move that has angered trade unions.
A government economic thinktank has estimated that raising the retirement age will save the state 4 billion euros annually. Social Affairs Minister Piet Hein Donner has said the economy will be short of 800,000 workers by 2040 unless the retirement age is hiked.
"It is an important step in the process of modernising the retirement system," Dutch Prime Minister Jan-Peter Balkenende told reporters.
He urged Dutch unions to be constructive, underlining worsening government finances and dropping labour participation.
Last week, Dutch trade unions staged work stoppages and promised more protests.
"This proposal does not meet our critics at any point," FNV union confederation chairwoman Agnes Jongerius said in a statement.
According to the proposal, which now has to be ratified by the Dutch parliament, those aged 55 or older as of Jan.1, 2010 will still be able to retire at 65, while those younger will have to work two extra years to collect pension benefits.
The new policy will introduce in two phases. From 2020 the people will have to work until 66 and and from 2025 until to 67.
A recent poll by TNS NIPO showed 39 percent of Dutch people think raising the retirement age is acceptable, down from 45 percent in March, while 57 percent think it is unacceptable. A total of 38 percent are prepared to participate in industrial action.