Portuguese prime minister resigns over rejected austerity plan | Europe| News and current affairs from around the continent | DW | 23.03.2011
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Portuguese prime minister resigns over rejected austerity plan

Portugal’s prime minister has resigned after opposition parties voted down the government’s austerity plans. The country now faces snap elections and will most likely need a bailout to avert its worsening budget crisis.

Jose Socrates

Socrates could not get his austerity measures passed

Portuguese Prime Minister Jose Socrates on Wednesday night announced he would resign from his post. The step comes in reaction to the country's five opposition parties rejecting Lisbon's latest austerity package

As the country is run by a minority government, the lack of opposition support means the plans cannot be implemented.

"Today every opposition party rejected the measures proposed by the government to prevent that Portugal resort to external aid," Socrates said in a televised address to the nation following the defeat in parliament.

"The opposition removed from the government the conditions to govern. As a result, I have presented my resignation to the president."

Ahead of the crucial vote, Socrates had tried to rally support by threatening to step down if the measures were rejected.

Snap elections

The country is now headed for prolonged political turmoil. A caretaker government is expected to step in until snap elections can be held.

The main opposition party, the Social Democrats, is currently leading in opinion polls. The party has suggested that a broad government coalition could take on the country's budget crisis.

A bucket full of gold coins

Lisbon will need a lot of money to get back on track

The austerity package would have been the fourth of its kind within only 11 months. The cuts would have affected pensions, health and education and would have meant an increase in taxes.

Prime Minister Socrates had hoped to cut the budget deficit from 7.3 percent in 2010 down to 4.6 this year. The opposition had criticized the cuts as too crippling for the economy and too much of a damper on growth.

Bad timing

With the country's borrowing rates already at a record high, Wednesday's no-vote means that Portugal is likely to follow in the footsteps of Greece and Ireland in needing a bailout from the EU and the International Monetary Fund.

The vote and Socrates' resignation came on the eve of a key EU summit aimed at restoring investor confidence in the eurozone. At the Brussels meeting on Thursday and Friday, politicians are expected to discuss a larger rescue fund for countries with a sovereign debt problem.

Portugal might now very well be the first country to request a lifeline from that fund.

Author: Andreas Illmer (dpa, AFP)
Editor: Nicole Goebel

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