Portuguese parliament rejects budget bill, snap election looms

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Portugal's Prime Minister Antonio Costa gestures during the debate on the 2022 state budget draft in first reading at the Portuguese Parliament, in Lisbon

LISBON (Reuters) - Portugal's parliament rejected the minority Socialist government's 2022 budget bill on Wednesday as the hard left sided with the conservative opposition, in a move likely to trigger snap elections in coming months.

Lawmakers voted 117-108 with 5 abstentions to throw out the bill that envisaged income tax cuts for the middle class and increased public investment to spur post-pandemic recovery, while reducing the deficit to 3.2% of gross domestic product from 4.3% in 2021.

Prime Minister Antonio Costa's hard-left former allies, the Communists and Left Bloc, had demanded more benefits and protections for workers, improvements in the social security system and more public investment in the health service, which they say Costa ignored as he is too focused on deficit cuts.

Costa said he could not accept damaging hard-earned international credibility in a country with one of the heaviest public debt burdens in Europe and which was subject to painful austerity in 2011-14 under an international bailout.

President Marcelo Rebelo de Sousa warned on Monday that without a budget, which relies heavily on EU pandemic recovery funds, he would have no alternative but to dissolve parliament and call snap elections two years ahead of schedule.

Costa, who presided over six years of relative stability with solid economic growth and a small budget surplus before the pandemic struck last year, has ruled out resigning and said he would lead his party in any election campaign.

(Reporting by Andrei Khalip and Sergio Goncalves; Editing by David Holmes)

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