Amid debt crisis, Portuguese PM at mercy of parliament

Portugal’s parliament, barring unforeseen developments, was set Wednesday to reject Prime Minister Jose Socrates’ latest austerity plan for the debt-ridden country.

The Socialist leader has said he would resign if parliament rejects the new “stability and growth programme,” the fourth put forward by his minority government in less than a year.

Portuguese media say that could happen as early as Wednesday.

The next day, an EU summit kicks off that is to focus on the eurozone debt crisis amid mounting speculation that the bloc’s rules will force Portugal to follow Ireland and Greece down the bailout road as the cost of borrowing spirals out of control.

On Tuesday Portuguese President Anibal Cavaco Silva said there was no “room for manoeuvre” to avoid a political crisis.

“The manner in which the (austerity) programme was presented, the lack of information.. all this reduces substantially the room for manoeuvre,” he complained.

The document, whose final version does not need to be submitted to Brussels until the end of April, need not be approved by parliament in the debate set to start at 3:00 pm (1500 GMT).

Instead the lawmakers will debate several resolutions that have been proposed by opponents to the plan from both sides of the aisle.

Critics especially resent the government’s practice of dealing directly with European institutions without prior consultation.

Socrates’ Socialist Party (PS), which has 97 seats in the 230-seat body, called the upcoming debate “decisive for the life of the country not only for the coming months but for the coming years.”

The party’s parliamentary group leader Francisco Assis, stressing “convergences” between the PS and the centre-right Social Democrats (PSD), said: “Consensus is still possible. There’s no basic reason why we can’t get there.”

The two parties agree on deficit reduction goals as well as the need for structural reforms, he noted.

But the PSD, Portugal’s main opposition party, has repeatedly reaffirmed that it would not back the new measures, citing rising unemployment and stalling economic growth.

Portugal is trying to squeeze its public sector deficit to 4.6 percent of gross domestic product this year, and then to the eurozone limit of three percent in 2012.

Socrates’ programme, billed as “guaranteeing” to rein in Portugal’s deficit to two percent of GDP by 2013, is considerably more draconian than austerity measures that have been in effect for a year already.

The plan calls for new budget cuts, a longer freeze on retirement, new taxes and cuts in social programmes.

The prime minister’s office has said Socrates will make an exceptional appearance Wednesday at the opening of the debate, though Finance Minister Fernando Teixeira dos Santos is to represent the government at the proceedings.

Teixeira dos Santos warned Monday that a political crisis could weigh heavily on the state’s position to borrow, with hefty loans needed in the coming weeks to meet a nine billion euro (12.9 billion dollar) debt bill by a June 15 deadline.

Turning a deaf ear to the Socialist government’s appeals, PSD leader Pedro Passos Coelho, who at 46 is considered a potential successor to Socrates, said Monday that early elections had become “inevitable”.

“At this point, the country can only go forward, clarifying its situation and hoping that a new government will be in better conditions for obtaining the necessary results,” he told a political rally in the north.

Portugal’s economy contracted by 0.3 percent in the final quarter of last year, and the central bank forecasts a 1.3 percent contraction due to the austerity measures.