PORTUGAL’S MAIN opposition Social Democrats (PSD) have again refused to back new government austerity measures, raising the risk that the minority administration could fall after a vote later this week. The Socialist government will present its latest austerity plan to parliament, with a vote expected tomorrow.

José Socrates has threatened to resign as prime minister if the opposition fails to back the plan. He says a rejection would exacerbate the country’s debt crisis and push it into following Greece and Ireland in seeking a bailout.

But markets have long seen Portugal’s request for a bailout as a certainty, and analysts say a change of government is unlikely to make much difference, given the Social Democrats, if elected, are expected to stay the austerity course.

PSD leader Pedro Passos Coelho said after meeting Mr Socrates that his party, which leads in opinion polls, backed budget consolidation goals promised to Brussels, but not the newer measures, which he said were rushed and inadequate.

“We reaffirmed that the measures presented by the government . . . do not deserve the support or approval of the PSD since they lay out a profoundly unfair path for the Portuguese,” Mr Passos Coelho told reporters.

The party has withdrawn the backing for cost-cutting it had given to Mr Socrates earlier in the euro debt crisis.

“There are no conditions of trust for any talks to be resumed between the PSD and the government,” Mr Passos Coelho said.

Finance minister Fernando Teixeira dos Santos said in Brussels: “Political debate is being made very tense by the opposition. I think it is very difficult for us to reach a consensus.”

Portugal’s 10-year debt yield was little changed yesterday from Friday’s levels at about 7.5 per cent and the premium investors demand over benchmark German Bunds narrowed.

Gilles Moec, senior economist at Deutsche Bank, said the political turmoil was expected.

“The problem with Portugal is that, for a lot of investors it’s a country that, no matter what, is going to go to the EFSF (rescue fund) . . . so whatever misadventures we have between now and the actual decision, a lot of it is probably already priced in,” Mr Moec said. – (Reuters)