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Portuguese opposition says no talks on austerity plans

Published on 21/03/2011

The head of Portugal's main opposition party said Monday they would not hold any talks with the minority government over its plans to impose more austerity measures in the struggling eurozone nation.

“There are no conditions of confidence in which to hold negotiations,” said Pedro Passos Coelho, the leader of the centre-right opposition PSD party, as the country appeared headed into a political impasse.

Prime Minister Jose Socrates has said he will resign if the package is rejected.

The PSD has abstained to allow passage of previous austerity measures “in the national interest” as the country has sought to avoid an international bailout like Greece and Ireland.

The government said the measures are crucial to reassure markets that Portugal will meet its target to reduce its public sector deficit amid mounting speculation that it will need to seek a bailout as Lisbon’s cost of borrowing has risen to unsustainable levels.

But with rising unemployment and economic growth stalling, the PSD said that it would not support new austerity measures announced earlier this month by the government without consultation.

Apart from the austerity programme already in force, which involves tax rises and pay cuts in the public sector, the government announced earlier this month extra austerity measures to cut its deficit, including taxing pensions and cutting health spending and some social security payments.

Thousands of workers from the public and private sectors converged on Lisbon from all over Portugal on Saturday to demonstrate against the goverment’s austerity policy, rising unemployment and insecurity.

The new austerity measures were due to be submitted to parliament on Monday and be debated on Wednesday. The opposition was expected to try to force a vote on the measures.

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.

However the country’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.