Portuguese lawmakers were set to approve the minority government's contested austerity plan Wednesday, bringing the country into line with other debt-laden eurozone nations aiming to restore market confidence in their economies.
Portugal is facing similar problems to Greece, Ireland and Spain, where a high debt load and anemic growth have worried international investors and threatened the stability of the 16-nation euro currency.
Portugal's borrowing costs have surged as investors demand a higher return for risking their money on a country viewed as one of the bloc's weakest members.
The government paid an average interest rate of 1.8 percent on 3-month Treasury bills it auctioned Wednesday, up sharply from a rate of 0.5 percent in April. The rate for 12-month bills was 3.3 percent, up from 1 percent seven months ago.
While Portugal has experienced no difficulty raising money, the higher cost is an unwelcome drain on public finances at a time when tax revenue is falling and welfare expenses grow _ unemployment is now at 10.6 percent.
The center-left Socialist government plans to introduce tax hikes, steep curbs in expenditure and public sector pay cuts next year, despite an outcry from trade unions which have called a general strike for Nov. 24.
The main opposition Social Democratic Party struck a deal with the government last weekend to allow the austerity plan to pass. In return for a review of deals with the private sector on major infrastructure projects, which they say will worsen debt, the center-right Social Democrats agreed to abstain from Wednesday's parliamentary vote.
Its abstention ensured the government a majority of votes for approval of the measures, which are part of the 2011 state budget.
Prime Minister Jose Socrates, who threatened to quit if the measures were not approved, urged the opposition parties to stop attacking his austerity plan. Political tension will perpetuate market uncertainty about Portugal's ability to dig itself out of its debt hole, he said.
"We can't go on without (political) stability, and this budget needs stability to be implemented," Socrates said.
Portugal's budget deficit _ the shortfall between what it spent and what it received _ stood at 9.3 percent of gross domestic product last year. That was the fourth-highest deficit in the eurozone and spooked international investors already doubting the fiscal health of eurozone nations.
The government intends to cut the budget deficit to 4.6 percent next year with the austerity package, which includes an average 5 percent cut in public sector pay and a sales tax hike to 23 percent from 21 percent.
The measures are forecast to dent the country's already anemic growth and increase unemployment.
The Bank of Portugal says the economy contracted 2.7 percent last year. It predicts growth of 0.9 percent this year and 0.2 percent in 2011.