LISBON, Portugal — Portugal's prime minister has quit after opposition parties overwhelmingly rejected his last-ditch round of austerity measures aimed at preventing the eurozone's weakest economy from plunging into chaos. The move turned the dept-plagued nation into the prime candidate for the continent's next bailout package.
All opposition parties united to defeat Prime Minister Jose Socrates' proposals in a parliamentary vote, saying the belt-tightening went too far on the eve of a summit of European leaders
But their decision means that Portugal is much more likely to be forced to seek a bailout like those accepted by Greece and Ireland last year, and puts Spain squarely into the crosshairs of nervous investors concerned about which European nation might be next.
Socrates followed through on a pledge that he would resign if the measures were not approved, saying the opposition parties "took away the government's ability to continue running the country."
"As a consequence, I have tendered my resignation," Socrates said in an announcement carried live on television.
In keeping with Portugal's constitution, Socrates formally submitted his resignation to Portugal's president, a ceremonial figurehead who has no executive powers. The prime minister's resignation ended the center-left Socialist government's six-year period in power.
Socrates' latest austerity package was its fourth set of measures introduced over 11 months as Portugal scrambled to avoid the embarrassment and financial consequences of asking for outside help to prop up its shaky economy. The nation has already introduced tax hikes and pay cuts that have angered trade unions and prompted a wave of successive street demonstrations and strikes.
Portugal's problems could hurt efforts by European leaders seeking to prop up confidence for the eurozone itself, and could prompt more market turbulence for the bloc, dooming Lisbon to accepting outside financial assistance. Many investors believe Spain, the zone's fourth largest economy, is simply too big to bail out.
European leaders hope to soothe nervous international investors at a two-day summit in Brussels starting Thursday, but they will also be dealing with political uprisings in the Arab world, and the fallout Japan's nuclear crisis. Socrates, who will preside over a caretaker Portugal government until elections are called, is scheduled to attend the meeting.
Socrates said that his failure to push through his austerity measures came "at the worst possible time — ahead of a summit that's decisive for Portugal and decisive for Europe too."
He also said the rejection of his plan increased the probability of Portugal asking for outside help which would entail "much tougher measures" than those he proposed — moves that already won the backing of European leaders.
Foreign financial assistance comes with strings attached, including a role for the International Monetary Fund, which strips away government control of key fiscal policies for years, making it a last resort for cash-strapped countries.
Socrates said his government had done all it could to avert a bailout "so we wouldn't end up in a situation like Greece or Ireland" where fiscal measures imposed by the bailout terms have squeezed the finances of families and companies.
A bailout would be "deeply negative for the image, prestige and reputation of the country," Socrates said.
Debt woes, and differences over how to tackle them, also brought down Ireland's government earlier this year after it accepted a bailout, forcing an election that was won by the main opposition party.
The government's downfall set Portugal, a country of 10.6 million people, adrift just as it is trying to restore its fiscal health.
Portuguese President Anibal Cavaco Silva said after Socrates' announcement that he will meet with all political parties on Friday to decide the way forward, but the election of a new government puts Portugal into at least two months of political paralysis and limbo because elections won't happen under law until May or June.
Opposition parties said the government's latest plan went too far because it would hurt Portugal's most vulnerable citizens, including retired people who would face increased taxes. Socrates' package of austerity measures also boosted cuts in social welfare programs, and increased public transpiration fees.
Opponents were unrepentant, with Social Democratic lawmaker Luis Montenegro saying his party had "the patriotic duty ... to stop the Socialist government going down the wrong, dead-end path."
Socrates' socialist have only 97 lawmakers in the 230-member legislature, and needed the consent of their rivals to enact policy.
The political turmoil in recent months fueled a rise in Portugal's borrowing rates, just as it was attempting to cut spending. The yield on the country's 10-year bond, for example, was up to 7.63 percent Tuesday — its euro-era record level.
The interest rate has been above an unsustainable 7 percent for weeks despite the government's earlier austerity measures which, its political rivals say, failed to dispel investor fears about lending to Portugal.
Hurting Portugal more is a feeble national economy, with the government predicts a double-dip recession this year, and unemployment of 11.2 percent. Moodys Investors Service recently downgraded the country's credit rating, and Standard & Poor's has warned it may follow suit.
The government says Portugal has enough cash in reserve to meet a €4.5 billion ($6.4 billion) bond repayment next month, the first of two major redemptions this year, but the political problems are likely to make future funding of government programs via bonds even more difficult.
"Without a strong structural reform agenda, in our view, it is very unlikely that Portugal can grow out of its indebtedness," Barclays Capital said Wednesday.
The absence of an elected government will stall efforts to generate fresh growth even though the main opposition center-right Social Democratic Party, which recent opinion polls predict would win an election, backs continued measures to reduce debt and improve competitiveness.
Portugal's head of state could invite all six parties represented in Parliament to form a coalition government, which would avoid the need for immediate elections. But there is deep animosity among them, making that option unlikely.
That would leave the Socialist Party in power as a caretaker government which, under the Constitution, is confined to "acts strictly necessary to ensure the management of public business."
The scope of those powers has been widely debated by experts, but it is unlikely to grant the authority to request a bailout unless mandated by Parliament.
The president must spend days following constitutional procedures — convening a series of meetings with all political parties and with the Council of State, an advisory panel — before fixing an election date at least 55 days away.
The winner of the election then needs several days to pick members of government and announce a date for a swearing-in ceremony.
AP Business Writer Alan Clendenning contributed from London.