Armando Franca, Associated Press
LISBON, Portugal — Portugal's Parliament gave its blessing Wednesday to the country's severest austerity measures in almost 30 years as it scrambles to free itself from a ruinous debt crisis and help relieve pressure on the wider eurozone.
Lawmakers approved the government's spending plans for next year, including a new round of tax hikes and pay and welfare cuts that will further crunch living standards amid a deepening recession and record unemployment.
Portugal is locked into a debt-reduction program promised in return for a €78 billion ($104 billion) international bailout earlier this year.
Left feeble after a decade of anemic growth when it piled up debt, Portugal added to the 17-nation eurozone's troubles as it followed Greece and Ireland in needing a financial lifeline.
The center-right coalition government and the main opposition Socialist Party agreed to the bailout terms, ensuring broad political consensus in a state budget vote.
The coalition has 132 seats in the 230-seat Parliament. The Socialists abstained, saying the budget should do more for economic growth.
Finance Minister Vitor Gaspar told lawmakers the cuts are needed "to restore the confidence of the Portuguese people, the markets and our international partners." The budget will help "put (Portugal) back on the path to sustainable development," he said.
Nevertheless, the government has struggled to change Portuguese habits and contain spending since it took office in June.
Gaspar said one-off measures, such as a 50 percent tax on Christmas bonuses and transferring banks' pension funds to the Treasury, will ensure Portugal achieves this year's budget deficit target of 5.9 percent. That is down from 9.8 percent in 2010.
The measures, however, are expected to worsen Portugal's double-dip economic recession and drive unemployment to a record 13.4 percent next year. The jobless rate currently stands at 12.9 percent.
The government predicts the economy will contract by 3 percent next year, when it expects the recession to bottom out.
Under the budget, income tax, sales tax, corporate tax and property tax will all increase from Jan. 1. Welfare entitlements, meanwhile, will be curtailed.
In addition, the government is in talks with trade unions and business leaders about its proposal to grant employers the right to require staff to work an extra 30 minutes a day without overtime pay, adding to the current 40-hour work week. It also wants to scrap four public holidays.
Portugal is one of western Europe's poorest countries. More than 300,000 earn the minimum monthly salary of €485 ($655), and average pay is around €1,000 ($1,350) a month, according to the National Statistics Institute.
The austerity policies have ignited broad outrage and prompted a general strike last week, but the government says it is determined to abide by the bailout agreement.
Even so, lenders remain doubtful about hard-up Portugal's recovery prospects and the wider health of the eurozone. The interest rate on Portugal's 10-year bonds hit a record 14 percent Wednesday.
The last time Portugal needed such deep spending cuts was in the 1980s, during chaotic years following a revolution, when the International Monetary Fund lent it money.
The government gave in to some opposition spending demands. It spared public employees and pensioners who earn less than €600 ($810) a month from losing their Christmas and vacation bonus — each roughly equivalent to a month's pay — next year. That exemption covered some 50,000 public workers and almost 2 million pensioners.
To make up for the exemption, taxes on dividends, including shares and savings, will rise to 25 percent from 21.5 percent next year.
Despite the difficulties, most Portuguese want to stay in the eurozone, an opinion poll indicated. The Eurosondagem survey published Monday said 70 percent of people questioned prefer to keep the single currency, even though only 36.5 percent agreed with the austerity measures.
The poll, based on 1,010 telephone interviews Nov. 15-17, had a margin of error of 3 percent.
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