Portuguese leader's future hanging on key austerity vote

The fate of Prime Minister José Sócrates' minority Socialist government could rest with a crucial vote today in parliament on the administration's latest batch of deficit-cutting measures.

The vote may also determine whether or not Portugal has to call in outside help to resolve its debt crisis.

The opposition Social Democrat Party (PSD) has come out against the latest austerity measures, which are included in the Stability and Growth Pact (SGP) the government wants approved ahead of a European summit on the euro-zone debt crisis slated for March 24-25. The Socialists need the PSD's support to get the measures through parliament.

Sócrates has threatened to resign if the latest belt-tightening package ? which is equivalent to 4.5 percent of GDP over the next three years and includes a special tax on pensions over 1,500 euros a month ? is not approved. Finance Minister Fernando Teixeira dos Santos said on Monday that early elections could cut off Portugal's funding sources and spark the need for a bailout.

The SGP proposals envisage a scenario in which Portugal's economy shrinks by 0.9 percent this year after growth of 1.4 percent. The 2011 austerity state budget pointed to growth of 0.2 percent this year. The government is aiming to cut its public deficit to 4.6 percent of GDP from about 7 percent last year.

The European Commission is watching the political situation in Portugal "very closely,"Commission spokesman Amadeu Altafaj told reporters in Brussels on Tuesday. Altafaj defended Sócrates' SGP plan as one that would allow Lisbon to meet its deficit-reduction target commitments and to recover market confidence.