Oct.15 - As Portugal's delivers a harsh new budget it's prime minister vows to stay the course of austerity despite the political damage it is doing to his party and fears Portugal could follow Greece's painful path. Sonia Legg reports
It's kept a lower profile than Greece or Spain. After accepting a bailout from European partners last year Portugal's government has largely tried to get on with things. But the problem of high unemployment brought protestors onto the streets again at the weekend. (SOUNDBITE) (Portuguese) UNEMPLOYED TEACHER, ANDREIA PEREIRA, SAYING: "I'm unemployed and very unhappy with this government's measures. It's going down, and it's taking us with it. We are hitting rock bottom." The government's socialist opponents won a regional election at the weekend. But Prime Minister Passos Coelho says he will not flinch from a strategy that has been hailed exemplary by EU leaders. His government's new budget delivered by Finance Minister Vitor Gaspar is the harshest since Portugal secured a 78 billion euro bailout from the EU and IMF. It includes sharp income tax rises, pension cuts and higher property taxes. But it comes at a time when many policy makers are questioning the validity of tough austerity measures. Many say they haven't done Greece much good. But Michael Michaelides from RBS says investors fear the anti-austerity trend. (SOUNDBITE) (English) MICHAEL MICHAELIDES, RBS, SAYING: "This could send a message to other countries that if you push back on certain measures you get alternative measures in place which are more favourable to the population so this could be one of the risks going forward for the crisis." The troika is yet to report on its latest examination of Greece's finances. It's hoped they'll have a verdict ahead of a key EU summit on Thursday. It may get more time to hit its deficit targets - many fear Portugal's finances may soon need similar scrutiny. Sonia Legg, Reuters.