The Portuguese Parliament has passed the debt-ridden government's austerity budget aimed at restoring the confidence of financial markets amid reports that the country is next in line for a financial rescue package.
The budget passed through the Parliament in Lisbon on Friday, as the Opposition Social Democratic Party (PSD) kept its promise not to vote against the hard measures, and abstained from voting in the best interests of the country's fragile finances.
The ruling Socialists voted for the controversial measures that will cut wages, pensions and jobs drastically, while other parties voted against it.
PSD leader Pedro Passos Coelho urged the minority government to hold a tight control on spending. PSD's stance was crucial in the passage of the budget, failing which, Prime Minister Jose Socrates had threatened to resign.
The budget was approved after the EU Commission as well as Portuguese government spokesman dismissed a report by German daily Financial Times Deutschland that Portugal's eurozone partners had joined the European Central Bank in urging Lisbon to apply for a EU bailout package.
Under intense pressure to cut a high level of national debt which is undermining its economy and fueling market concerns that it may need a bailout, Finance Minister Fernando Teixeira dos Santos had no choice other than announcing a number of cost-cutting measures such as reducing wages for public-sector workers and freeze pensions next year, and increase taxes to help pay off the debt.
Lisbon has proposed to increase VAT to 23 per cent, the highest rate in Europe.
The Portuguese government is committed to reduce national deficit from 7.3 per cent to 4.6 per cent of GDP in 2011 in an effort to convince international investors that it will not be forced to seek a bailout like Ireland or Greece.
Normal life in Portugal was affected on Wednesday, as public and private-sector workers joined the country's biggest-ever strike in protest against the austerity measures.
It was the first joint strike since 1988 by the country's two largest trade union confederations -- UGT and CGTP -- representing 1.5 million workers in the public and private sector.
Portuguese workers were the latest to join a wave of industrial actions that other troubled euro economies such as Greece and France had been witnessing in the latter half of 2010, as governments were forced into unpopular cost-cutting programs to overcome mounting deficits or to conform to bail-out commitments.
The Greek government had been taking a number of austerity measures since March to battle its budget-deficit crisis, inviting a series of anti-government protests.
Public wrath raged over French government's move to reform the country's pension system as part of austerity measures weakened with President Nicolas Sarkozy vowing to press on with the measures saying that there is no other way out.
Portugal's Prime Minister had categorically denied that Lisbon will be forced to seek an European Union bailout like Ireland or Greece, saying that his country did not need financial aid.
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