UPDATE 1-Portugal govt says to keep rejecting bailout

Thu Mar 24, 2011 10:43am EDT

* Socrates at EU summit Thursday despite resignation * Minister says foreign aid bad for economy

(Adds quotes, details)

LISBON, March 24 (Reuters) - Portugal's government will continue rejecting an international bailout following Prime Minister Jose Socrates' resignation tendered on Wednesday, Cabinet Minister Pedro Silva Pereira said on Thursday.

"The government will continue to fight against the possibility of resorting to foreign aid... Our position is clear -- rejection of foreign aid," he told reporters after a cabinet meeting, adding that the government did not consider a bailout as inevitable.

"Foreign aid would have very serious consequences for the economy," he said.

Portuguese opposition parties refused to support the latest package of austerity steps announced by the minority Socialist government on March 11, forcing Socrates to resign on Wednesday.

Despite the resignation, Socrates is still attending a two-day European Union summit in Brussels on Thursday and Friday, and there has been speculation that he could ask for a bailout there as Portuguese bond yields hit new euro lifetime highs.

Socrates has been adamantly opposed to requesting aid and the government intends to hold that line, at least until a new government is formed, which is expected to take about two months if a snap election is called.

Silva Pereira also said that the measures rejected by parliament were mere proposals and did not represent a final economic plan, thus the Portuguese state was not bound by those measures despite having won Brussels' praise for them earlier.

German Chancellor Angela Merkel said she regretted the rejection of the measures in parliament and urged the political parties to stick to the goals of the country's fiscal consolidation programme.

These goals include cutting the budget deficit to 4.6 percent of gross domestic product this year, to 3 percent in 2012 and to 2 percent 2013. The government has said the deficit reached around 7 percent last year, below a target of 7.3 percent. (Reporting by Daniel Alvarenga, writing by Andrei Khalip; Editing by Toby Chopra)

((andrei.khalip@thomsonreuters.com; (351) 213-509-209; RM: andrei.khalip.reuters.com@reuters.net))

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