Workers step up cuts battle

The government announced steep increases in income taxes next year to meet the financial targets demanded by troika lenders in return for last year's €78 billion (£49bn) bailout.

Finance Minister Vitor Gaspar said today that the increases would be "enormous."

The main opposition Socialist Party described the tax rises as "brutal."

Party leader Antonio Jose Seguro said: "Everything is going wrong in our country."

He told a parliamentary debate around a motion damning the rises. "This prime minister has killed our economy."

The tax rises come on top of pay and welfare cuts and tax rises this year that have fuelled growing discontent.

Portugal is in a deep recession, with record unemployment of 15.9 per cent.

Compounding the coalition government's difficulties, Prime Minister Pedro Passos Coelho had told the Portuguese that their sacrifices over the past 18 months would pay off, the recession would bottom out this year and the jobless rate would level off at 16 per cent.

But the government now predicts that the economic contraction will extend into 2013 - a fourth year of recession in five - and unemployment will rise to 16.4 per cent.

Trade union leaders were meeting to decide how to fight the latest measures.

The General Confederation of Portuguese Workers, the largest union group with around 600,000 members, has already announced a strike against austerity on November 14.