The opposition Socialists demanded a renegotiation of Portugal's bailout terms, raising a hurdle to a cross-party pact the president says is needed to end the eurozone country's dependence on international funding next year.
Prime Minister Pedro Passos Coelho and Socialist leader Antonio Jose Seguro said they are ready to discuss a deal, but analysts say their divergence on painful austerity policies linked to the bailout could make it hard to resolve the crisis. "We have to abandon austerity politics. We have to renegotiate the terms of our adjustment programme", Seguro told parliament. "The prime minister has to recognise publicly that his austerity policies have failed."
The political turmoil has already forced Lisbon to request a delay in the eighth review of the bailout by its creditors, initially due to start on Monday, until the end of August or early September.
The Socialists have blamed the government's austerity drive under the €78 billion bailout for pushing Portugal into its biggest economic slump since the 1970s and unemployment to record levels of around 18 per cent.
"More time is something which we have always fought for. More time so our adjustment curve is not so steep and we can relieve sacrifices families and businesses have to make", Seguro, whose party lead in opinion polls, said. The Socialists had lobbied Cavaco Silva to call a snap election immediately, a move which the president rejected, saying it would significantly increase the risk of Portugal being forced to request a second bailout.
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