LISBON, Portugal (AP) — Portugal's prime minister asked opposition parties to support his tough program of pay cuts and tax hikes Thursday, though there remained few signs of political unity to tackle the country's pressing financial problems.
Prime Minister Jose Socrates appealed to his opponents in Parliament to set aside "political calculations" and line up behind an austerity package devised to alleviate a debt crisis that has threatened to engulf the country.
Portugal’s budget deficit — the amount by which it overspent — reached 9.3 percent of gross domestic product last year. It was the fourth-highest deficit in the eurozone and helped spook investors worried about the financial soundness of the euro currency, which is shared by 16 countries including Portugal.
"It’s time to act," Socrates told the opposition parties. "We have to reduce our budget deficit and we have to do it quickly."
The debt-reduction plan requires Parliament’s approval to be enacted but the center-left Socialist government doesn’t have enough votes on its own to authorize the measures.
Parties on the right balked at the prospect of more taxes, while those on the left opposed cuts in state services and welfare programs. They said they would examine the plan in detail before deciding whether to back it.
The plan, which is part of the 2011 state budget, goes to committee stages for discussion next month before a final vote in November.
The government has said it can’t run the country without a budget but it hasn’t stated clearly whether it would resign if its proposals were rejected.
The government announced its austerity measures late Wednesday as Portugal’s financial plight became acute. Borrowing costs rose to a euro-era record, deepening concern the country may not be able to meet international debt obligations and need an international bailout like the one that rescued Greece from bankruptcy in May.
The government’s plan entails a 5 percent cut in public sector pay for those earning more than €1,500 a month and a freeze on civil service promotions and pension levels next year, as well as cuts in some welfare benefits by up to 25 percent.
To increase revenue, the government intends to raise sales tax to 23 percent from 21 percent.
The measures are similar to those taken earlier this year by Greece, Ireland and Spain, other eurozone countries which have dug themselves deep into debt.
The main opposition center-right Social Democratic Party said the government lacked credibility and had lost the trust of the Portuguese. However, Social Democrat leader Pedro Passos Coelho said he was prepared to negotiate possible alterations to the austerity plan with the government.
Trade unions were angered by the proposed measures, saying they would cripple the country and make workers poorer. The General Confederation of Portuguese Workers, the largest grouping, said it would consider organizing protests. In May, when a first package of austerity measures was announced, it brought more than 100,000 demonstrators onto the streets of Lisbon.
While it was fighting resistance at home, the government’s plan won praise from its European partners. The European Commission, the European Central Bank and other eurozone nations welcomed the "ambitious" steps.
"This budgetary path will contribute to the stabilization of the public debt level as planned and to subsequently bringing it back on a downward path," they said in a statement in Brussels.
