LISBON, Portugal (AP) — Portugal's political and financial crisis deepened Thursday, when the main opposition party said it won't support the minority government's latest measures aimed at avoiding a bailout for the debt-laden country.
The decision could force the beleaguered government's downfall, triggering fresh market jitters just as Europe readies new measures to contain the continent's sovereign debt crisis.
Many analysts anticipate Portugal's high debt load and feeble growth will compel it to ask for financial assistance like Greece and Ireland last year. The government has ruled out asking for help, insisting its tax hikes, pay cuts and reductions in welfare benefits and other state spending will be enough to restore faith in the economy.
Pedro Passos Coelho, leader of the center-right Social Democratic Party, said Thursday he cannot endorse the center-left Socialist government's latest austerity plan — the fourth set of measures in 11 months. Other opposition parties also disagree with the steps.
The Social Democrats "don't feel they can give their blessing to these measures," Passos Coelho said in a brief statement to reporters.
He said the measures are "grievous and extremely unfair" for the weakest members of society and his party's opposition is "unshakable" because the government's strategy has failed.
"It's unacceptable that after a year the country is on the verge of bankruptcy," he said.
The Social Democrats, who agree debt levels must be lowered but disagree on how to achieve that goal, consented to previous austerity measures.
Prime Minister Jose Socrates said earlier this week he would quit if Parliament doesn't approve his government's latest austerity plan which was announced last week and helped clinch European support for Portugal's debt-reduction strategy.
The government held out an olive branch to opposition parties, saying it was ready to negotiate alterations to the plan.
"The plan isn't unchangeable," Socialist parliamentary leader Francisco Assis said. "I'm sure we can reach an understanding."
No date has yet been set for parliamentary vote on the plan, though Socrates has said he doesn't want to go to a March 24-25 EU summit without the plan approved.
That summit is expected to ratify a strategy hammered out last weekend, when European leaders agreed to increase the size of the bloc's bailout reserve and allow it to purchase government debt, hopefully offsetting market fears about the euro countries' fiscal soundness.
But Portugal's latest woes could generate a fresh wave of uncertainty and help spread contagion to other debt-heavy countries such as Spain, Italy and Belgium.
The fall of the government and consequent early elections would consign Portugal to at least two months of potentially ruinous political paralysis. Under the Constitution, a ballot can be held only 60 days after it is called.
The political row is the latest setback for the government's efforts to restore market confidence amid a wave of strikes protesting its austerity program.
Moody's downgraded Portugal's credit rating Tuesday, saying the debt-stressed country is struggling to generate growth and faces a tough battle to restore fiscal health. The Bank of Portugal expects the country to go into a double-dip recession this year.
Investors are already charging Portugal unsustainably high interest rates for loans amid fears it may not be able to settle its debts. The yield on Portugal's 10-year bond remained near 7.5 percent on Thursday, not far from euro-era highs, indicating continued jitters.
Portugal has bond repayments amounting to almost €9.5 billion ($13.25 billion) falling due in April and June. It has had no trouble raising money on markets so far, but needs to lower steep borrowing costs that are pushing it into a downward spiral.
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