Prime Minister José Sócrates resigned after Parliament rejected austerity measures proposed by the minority Socialist government to help Portugal avoid having to seek an international bailout.
Sócrates and his party had long opposed a bailout because of the tough fiscal conditions it would bring.
Parliament's rejection of the proposals “has taken away from the government all conditions to govern," the out-going prime minister said in a televised statement after the vote. He said his government would remain in power in a caretaker capacity.
All of the opposition parties spoke against the government's austerity measures, which called for reduced pensions and state spending.
Finance Minister Fernando Teixeira dos Santos warned that a rejection of the government's plan "will provoke an immediate rise in the country's risk and immediate consequences in terms of credit ratings."
To have its measures accepted and thus avert the collapse of the government, the Socialist Party needed 116 votes.The government has only 97 of the total of 230 seats in parliament.
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