Portugal opposition figures back deal on budget

Portugal-LISBON, Oct 19 - Two influential figures in Portugal's opposition Social Democrats (PSD) urged their party on Tuesday to allow passage of the government's 2011 budget bill, in a sign a deal to avert a fiscal crisis could be near.

The largest opposition party in parliament, the PSD has refused to say whether it will back an austerity budget that financial markets and Portugal's euro zone partners view as crucial to restoring confidence in the country's finances.

If the PSD votes against the budget bill, which foresees public sector wage cuts and a hike in value-added tax (VAT), it will not get through parliament, plunging Portugal into paralysis and likely sending its financing costs spiralling higher.

The PSD has said it will decide its stance at a late-night meeting on Tuesday, but ahead of that, an influential former finance minister in the party, Miguel Cadilhe, wrote in daily newspaper Publico that he would support passage of the bill if the government adjusted its VAT and spending plans.

Specifically, he called for making the government's planned two-point hike in VAT temporary -- for 2011 alone. He also said it should commit to additional spending cuts next year which were at least equal to the effect of the VAT hike.

"I would accept, albeit reluctantly, allowing the passage of the budget proposal" if these conditions were met, Cadilhe wrote.

Paulo Rangel, another senior PSD figure who sits on the party's top council, also called for the bill's passage "on patriotic grounds" to save Portugal from a more serious crisis, according to the Lusa news agency.