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Portugal government heads for collapse, crisis

Published on 23/03/2011

Portugal's Socialist government tottered toward total collapse Wednesday as the opposition vowed to reject cost-cutting measures aimed at averting an international bailout.

Prime Minister Jose Socrates has threatened to resign if he fails to garner support in parliament for the fourth austerity package in a year, the heart of his economic programme.

And the main centre-right opposition is demanding the “stability and growth” plan be rejected in the afternoon debate, saying Socrates’ minority government must be toppled so a new government can regain market trust.

“D Day: Socrates resigns,” blared the front pages of many Portuguese papers, already sure of his political demise.

The drama is unfolding on the eve of a European Union summit in Brussels which should finalise the bloc’s response to a eurozone debt crisis that has already forced Greece and Ireland into bailouts.

In a grim backdrop to the debate, transport strikes crippled the country with rail, metro and ferry services grinding to a halt to protest salary cuts.

The government has imposed an average five percent cut in public workers’ salaries since January and called on state companies to cut expenses by 15 percent as part of the austerity programme.

Socrates’ latest austerity package will be debated in parliament at 3:00pm (1500 GMT), with a vote scheduled three hours later.

Socrates’ office said he would make an exceptional appearance 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 this week a political crisis could weigh on the state’s position to borrow, with hefty loans needed to meet a nine billion euro ($12.9 billion) debt bill by a June 15 deadline.

Although there is no vote due on the package itself, opposition parties plan to back resolutions denouncing it and attacking the government for failing to consult parliament before making commitments in Brussels.

On Tuesday evening, the main opposition Social Democratic Party called for a vote against the package so as to force out the government “in the national interest,” saying a new prime minister and government could regain the trust of financial markets and Portugal’s European partners.

Social Democratic Party leader Pedro Passos Coelho, who at 46 is considered a potential successor to Socrates, has said early elections have become “inevitable”.

Socrates, who can only count on the support of 97 members in the 230-seat parliament, has promised to resign if the package is rejected but also to be a candidate in early elections which could be as soon as May or June.

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

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

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.

The 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.