The Portuguese parliament is preparing to vote on an austerity budget that will slash public sector pay by 5 per cent, freeze state pensions, cut welfare benefits and raise taxes.
Portugal is looking to reduce its budget deficit from 9.3 per cent last year to 7.3 per cent by the end of 2010 with an eventual target of 4.6 per cent in 2011.
The minority Socialist government believes the belt-tightening offers the only hope of convincing international investors that Lisbon can ride out the financial crisis.
It could prove an uphill battle as a majority of euro zone nations and the European Central Bank are urging the country to apply for a financial bailout from the European Central Fund.
Pressure is being applied on Portugal in order to save Spain, with a much larger economy, from going the same way as Greece and Ireland.
The crucial vote comes two days after a general strike failed to derail the government’s cutback budget cutback plans.