Portugal's government signalled on Wednesday it may ease new tax hike plans and cut spending instead to reach its fiscal goals after the plan came under attack by business leaders, unions and even members of the ruling coalition.
On Friday, the government of the bailed out nation said it would raise social security contributions by all workers to 18 percent from 11 percent in the 2013 draft budget, and on Tuesday it announced it would raise taxes on capital gains and property.
But Finance Minister Vitor Gaspar told a parliament committee the planned tax hikes were still a "work in progress" and could change before the draft budget is presented to the house by the mid-October deadline.
"We will make every effort possible to cut public administration spending and in this way will try to soften the set of fiscal tightening measures or the reduction of social spending that are now planned," Gaspar said.
Earlier, Portugal's industry confederation joined opposition parties and labour unions in criticising the latest tax hikes, saying they would deter investment and deepen the economy's slump even though the country's lenders have set easier budget goals.
The European Union and IMF agreed on Tuesday to ease the pace of Portugal's budget deficit cuts, but the government adopted additional tax hikes and said it would propose more austerity for 2013, indicating the new targets will still be hard to meet.
Joao Almeida, a deputy from the rightist CDS-PP party, which is part of the ruling coalition, also called on the minister not to raise taxes further in the draft budget.
"It is important that we try until the last minute, when the budget has to be presented, to replace what is the heaviest and most harmful burden for citizens with what is really essential, that is spending cuts," he said.
Opposition Socialist deputy Joao Galamba said the tax hikes were inadmissible.
"The minister has the duty to back off in this social experiment that is a catastrophe for the country," he said. "You have no right to subject Portuguese to your abstract reality."
(Reporting By Andrei Khalip, Sergio Goncalves and Daniel Alvarenga; editing by Ron Askew)