UPDATE 1-Portuguese opposition to decide on budget next week

* Failure could trigger political crisis and debt spiral

* Government says it is ready to negotiate

(Updates throughout with quotes and details)

By Filipa Lima

LISBON, Oct 14 (BestGrowthStock) – Portugal’s main opposition party
refused to say whether it would back the minority government’s
budget next week, intensifying uncertainty over austerity plans
which markets see as vital but which have provoked union fury.

Socialist Prime Minister Jose Socrates has said he will
resign if the budget is not passed — a step which would almost
certainly trigger sharp selling of Portuguese bonds as investors
doubt Lisbon’s ability to fix a deepening sovereign debt crisis.

“We will study the budget when it is presented and on
Tuesday we have a party meeting and at that time the party
leader will say what he thinks about the budget,” Miguel Macedo,
parliamentary bench leader for the opposition centre-right
Social Democrats (PSD), told reporters on Thursday.

He was speaking after the finance minister held meetings
with opposition parties to inform them of the broad guidelines
of next year’s budget.

The government, which rules without a majority, will present
the budget to parliament on Friday. Concern over the budget
contributed to sending Portuguese risk premiums to euro lifetime
highs last month.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For stories on Europe's debt crisis, click on: [ID:nLDE68T0MG] For a factbox on plans to cut budget deficit: [ID:nLDE69C1D0] For a graphic on Europe's debt crisis, click on: http://r.reuters.com/hyb65p ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

The clash over the budget was sparked after the Social
Democrats refused to give early support for the budget with the
Socialists last month.

The prime minister’s threat to resign has angered many
Social Democrats who feel they are being blackmailed into voting
for a budget including tax hikes they oppose. Their key demand
is that the government concentrate instead on cutting public
spending.

PRESSURE FROM BRUSSELS

Parliamentary Affairs Minister Jorge Lacao said the
government was ready to negotiate with the opposition on the
budget, whose main elements will be put to a vote on Oct. 29.

“The government showed its readiness for dialogue and
especially highlighted to the PSD what we consider to be most
important,” he said. “The country needs the PSD to contribute
with a position to pass the budget.”

The government, under pressure from Brussels to ensure it
meets budget goals, has already announced austerity measures for
2011 including a rise in value-added tax to 23 percent from 21
percent and a 5 percent cut in civil servant wages.

Pedro Mota Soares, the parliamentary leader of the rightist
CDS-PP, said his party would only adopt a position on the budget
when it is presented.

“Our voting position will be announced at the correct moment
when we see the full budget,” Mota Soares said.

“I want to make clear that all the signs we have seen (from
the government on the budget) are negative and incorrect,” he
said. “They are not the signs that the Portuguese economy needs
right now.”

Unions and workers are furious at the austerity the budget
will bring after years of dwindling incomes under the Socialists
and unemployment above 10 percent — its highest in two decades.
They are staging a general strike on Nov. 24.

UPDATE 1-Portuguese opposition to decide on budget next week