LISBON, Portugal — Portugal’s
government is on the verge of collapse after opposition parties withdrew their
support for another round of austerity policies aimed at averting a financial
The expected defeat of the minority
government’s latest spending plans in a parliamentary vote will likely force
its resignation and could stall national and European efforts to deal with the
continent’s protracted debt crisis.
The vote comes on the eve of a
two-day European Union summit where policymakers are hoping to take new steps
to restore investor faith in the fiscal soundness of the 17-nation eurozone,
Last year, both Greece and Ireland
had to accept multibillion dollar rescue packages after markets lost faith in
their governments’ efforts to deal with their debt burdens.
By most measures, Portugal is one
of the eurozone’s smallest and feeblest economies but its financial collapse
would likely trigger a fresh bout of nerves over other debt-heavy — and bigger
— euro countries such as Spain, Belgium and Italy.
The governing Socialist Party’s
parliamentary leader Francisco Assis made an 11th-hour appeal for opposition
rivals to negotiate changes to the latest austerity package and ensure the
Prime Minister Jose Socrates, who heads the
government, has said he will no longer be able to run the country if the
package is rejected.
Finance Minister Fernando Teixeira
dos Santos has said failure to enact the package — the fourth set of measures
in 11 months — would push Portugal closer to needing financial assistance.
But opposition parties say the
centre-left government’s latest austerity plan goes too far because it hurts
the weaker sections of society, especially pensioners who will pay more tax.
The package also introduces further
hikes in personal income and corporate tax, broadens previous welfare cuts and
raises public transport fares.