The Portuguese parliament on Tuesday approved a highly unpopular budget for next year. The center-right coalition used its overall majority in the house to pass the measure. All opposition parties refused to throw their weight behind the 2013 austerity program as hundreds of people protested against the budget outside the parliament building in Lisbon.

Next year's budget aimed at reducing Portugal's public deficit will cost the majority of workers the equivalent of at least a month's wage due to a hefty income tax hike. In addition, there will be massive cuts in the country's pension and health systems.

Tough times ahead

Opposition parties and trade unions have complained that next year's spending plan will further handicap an economy that is heading into a third straight year of recession.

But, the government had been under enormous pressure from international lenders to meet agreed savings targets and trim the public deficit down to the EU limit of 3.0 percent of gross domestic product (GDP) by 2014.

Last year, Portugal received 78 billion euros ($100 billion) in bailout funding from the EU and the International Monetary Fund (IMF).

Prime Minister Passos Coelho's government has predicted that the economy will contract by another 1.0 percent in 2013. But the Organization of Economic Cooperation and Development (OECD) warned in its annual forecast on Tuesday that a reduction of 1.8 percent would be more likely. That's meant a bleak outlook for Portugal's employed, with Lisbon forecasting the jobless rate to rise to 16.4 percent from 15.7 percent currently.

hg/ipj (dpa, AP)