The Portuguese Government has pushed ahead with a draft 2013 budget that includes massive tax rises and spending cuts, just two days after mass street protests against further austerity.
"The proposed budget is the only one possible ... we don't have any room for manoeuvre," Finance Minister Vitor Gaspar said after submitting the budget to MPs.
The new measures, a condition of debt-rescue funding, include a four per cent surtax and a reduction in pensions and social benefits.
Mr Gaspar confirmed that the average tax rate would climb from 9.8 per cent this year to 13.2 per cent under the budget proposal.
The average tax rate is also increased, reducing from eight to five the number of bands for income tax, with the top rate of 48 per cent kicking in at 80,000 euro ($101,936), nearly half the previous level.
"The 2013 government budget is a tough one for Portuguese," Mr Gaspar said.
"The increase in the tax burden is very significant."
The government pushed ahead with the austerity budget despite last month having had to backtrack on an initial package of measures, and a poll last week suggested that 70 per cent of the people oppose the government's policy.
In May 2011, the International Monetary Fund and European Union rescued Portugal from impending debt meltdown with a bailout worth 78 billion euros ($99.39 billion) conditional on budget and structural reforms.
The people have made clear in street protests their fatigue with austerity tied to the bailout which averted national bankruptcy.
In the last month, there have been many strikes and protests and on Saturday tens of thousands of people protested in the streets of Lisbon and in several other towns.
But Mr Gaspar warned that "calling into question the budget will call into question aid" under the country's bailout program.
He said the country had to implement the reforms required as part of the bailout to regain its financial independence, and that if they slow the adjustment "we will be under a prolonged tutelage of our creditors".
The increases could worsen a recession in Portugal. Official data suggests that the economy could shrink by 3.0 per cent this year with the unemployment rate being close to 16.0 per cent.
It is "a fiscal atomic bomb", said Socialist Party Leader Antonio Jose Seguro. For the Communist Party, it amounts to a "massacre".
The main trade union CGTP said it was "an attack on the dignity of the people".
The daily newspaper Diario Economico declared it to be "an insult to the Portuguese people".
The so-called troika of creditors, the IMF, EU and European Central Bank (ECB), have agreed to ease the targets for reduction of the public deficit.
This must now be 5.0 per cent of output this year and 4.5 per cent in 2013. But this concession was conditional on extra measures.
Even Portuguese President Anibal Cavaco Silva, who comes from the Social Democrat Party of Prime Minister Pedro Passos Coelho, has expressed concern.
"In current circumstances, it is not right to require a public deficit target from a country undergoing a process of budget adjustment which it is respecting come what may," he said on his Facebook page.
The situation is particularly delicate because the Portuguese, who up to now seemed to accept the need for austerity, have radically changed their attitude.
Their hand could be strengthened by a new and controversial study by the IMF on the so-called fiscal multiplier which appears to suggest that the degree of budget correction in several countries in western Europe is doing more damage to growth than generating benefits.
This is likely to provide fuel for those who oppose rapid reduction of deficits, as usually urged by the IMF.
But the findings are contested by some analysts.They say that the IMF analysis covers the wrong selection of countries and so presents an unduly gloomy picture of growth which in any case may turn out to be stronger than the data shows so far.
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