Pressure mounts on Portugese government

Apr 03, 2013, 3:32 PM EDT
Workers from the bus factory of Portuguese automakers group Salvador Caetano, protest at the factory gates against the temporary suspension of work covering 98 workers for a period of six months Tuesday, April 2, 2013, in Vila Nova de Gaia, Portugal.
(AP Photo/Paulo Duarte)

LISBON, Portugal (AP) — Opposition parties in Portugal presented a motion of no confidence in the government Wednesday, giving voice to widespread discontent as the bailed-out country endures a predicted third year of recession and a jobless rate of 17.5 percent.

The center-right coalition government had enough votes to easily defeat the motion in Parliament. But the political pressure added another dose of uncertainty into financial markets already jittery about the fate of Cyprus and the wider eurozone.

Portugal needed a 78-billion-euro ($100 billion) rescue two years ago when it was engulfed by the eurozone's financial crisis after a decade of low growth and rising debt.

The three-year bailout agreement signed with creditors — the European Central Bank, the European Commission and the International Monetary Fund — locked Portugal into austerity policies which are now widely blamed for the steep economic downturn.

The main opposition Socialist Party was a co-signatory of the bailout agreement, which was endorsed by all the country's main parties. But the consensus has frayed over the past year as tax hikes and pay cuts have stoked public anger, and now the center-left Socialists are demanding elections. A ballot is not scheduled until 2015.

Another risk is looming for the government as the Constitutional Court is expected to rule this month whether some austerity measures in the 2013 state budget, including cuts to old-age pensions and a one-off 3.5 percent tax on everybody's income, are lawful. Striking down the measures could torpedo the government's financial plans.

Socialist leader Antonio Jose Seguro told Parliament the government had lost the electorate's trust.

"We are already in a political crisis," he said. "This motion offers a way out of it."

The Socialist Party is committed to budget discipline but wants easier credit conditions from its bailout lenders and more measures to encourage growth, Seguro said.

Prime Minister Pedro Passos Coelho said his government will abide by the bailout agreement and noted that the bailout creditors have praised the government's policies.

He said it was the Socialists' "reckless spending that led Portugal to the edge of the financial abyss" as they had been in power from 2005 up to the 2011 bailout.