Portugal’s government ‘likely’ to be toppled

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Portugal's main opposition Social Democrats (PSD) again refused today (21 March) to back new government austerity measures, raising the risk that the minority administration of Prime Minister José Sócrates could fall after a vote just before a key EU summit to be held at the end of the week.

Parliament has its first scheduled plenary session this week on Wednesday and is unlikely to discuss and vote on the package before then. The government will present the plan, first announced on 11 March, to parliamentary leaders later on Monday.

Socrates has threatened to resign if the opposition maintains its refusal to back the austerity measures, prompting a crisis that his government says will most likely force Lisbon to have to seek foreign aid like Greece and Ireland.

The main opposition party, the centre-right Social Democrats (PSD), have said they would not support the plan, withdrawing from the backing they had given to Sócrates on cost-cutting earlier in the euro debt crisis.

"I'd say the government's fall is probable, though not inevitable, which shows there is very little room for negotiations," said political scientist Antonio Costa Pinto.

"And the worst thing is that the model of a grand coalition seems more and more unlikely after this fallout, even for this period of the acute debt crisis," he added

The timing of the vote would depend on whether and when one of the opposition parties presents a resolution on the package in parliament. But Público daily said Sócrates and his ruling Socialists were still hoping to obtain support for the measures before Thursday's start of a key European summit expected to approve a beefed-up eurozone rescue fund.

The government needs opposition support to pass legislation as it rules without a majority in parliament.

The administration announced a series of extra spending cuts and tax changes on 11 March, aimed at guaranteeing that the budget deficit is brought down to 4.6% of gross domestic product in 2011, as promised to Brussels, from around 7% last year.

(EURACTIV with Reuters.)

At their 11 March summit, eurozone leaders clear the way for an agreement to increase the EU's rescue facility to 440bn euros from its current level of around 250 billion.

Leaders agreed they would increase the guarantees they provide to the bailout fund to allow it to raise capital on international markets. This should ensure that the fund is capable of bailing out any eurozone states beyond Greece and Ireland that require assistance.

Portugal is seen as the country next most likely to need financial help. Spain may follow after that.

Portugal announced additional spending cuts and reforms on Friday to cut its fiscal deficit in an attempt to stave off intense pressure to seek a bailout, Reuters reported.

The plan targets an impact on the budget deficit of 0.8% of gross domestic product this year, the finance ministry said, but it did not revise its year-end deficit forecast of 4.6%, saying the new measures would bring added certainty that the goal is met.

These and other measures are designed to reach a 2% deficit goal in 2013, below the 3% threshold set by Brussels, as outlined by the government last year [more].

  • 24-25 March: EU leaders meet to forge final agreement on economic governance and rescue mechanism.

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