* Government reshuffled to heal internal rift
* PM says no margin for quick stimulus moves
* Coalition has parliamentary majority
By Andrei Khalip and Daniel Alvarenga
LISBON, July 30 Portugal's prime minister ruled
out any backtracking on its bailout terms on Tuesday as his
revamped government easily won a confidence vote intended to
show it has repaired an internal rift over austerity.
Speaking to parliament before the symbolic vote, Pedro
Passos Coelho also said the economy was giving signs of nearing
a turnaround after a long, deep recession, showing the country
was taking the right path out of its debt crisis.
All members of parliament from the two parties of the
centre-right ruling coalition, who have a solid majority in the
house, voted in support of the motion of confidence.
The opposition Socialists and two other left-wing parties
voted against, their leaders dismissing the premier's optimism
about the economy and saying austerity only leads to disaster.
A dozen protesters in parliament's gallery put on red clown
noses to show their disdain for the vote, which Socialist leader
Antonio Jose Seguro called a "make-believe act".
Some investors fear the re-jigged government may be less
amenable to further budget tightening because the party that
disagreed with some austerity measures has won more clout.
The premier said: "There are 10 months left of the
assistance programme, full of challenges and tough choices. But
it certainly isn't now that we will falter ... We will manage to
make structural spending cuts under the terms already
Portugal has promised to cut spending by 4.7 billion euros
($6.2 billion) by the end of 2014, the year in which Lisbon
hopes to return to normal market financing. Many investors
believe it will still need some form of further support, not
least due to its steep recession.
But Passos Coelho said: "There are growing positive signals
in the economy that we may be very close to the turnaround that
all the Portuguese want."
The economy is still in its worst recession since the 1970s
and the government expects it to shrink 2.3 percent this year
before returning to slim growth in 2014. It estimates that the
economy started recovering in the second quarter.
While the government has also promised to boost growth by
cutting corporate taxes, the premier said any fiscal reform must
be gradual. "We don't have budgetary margin ... to accommodate a
corporate tax reform in just one year," he said.
The ruling centre-right coalition narrowly avoided a breakup
this month by striking a deal that made the leader of the junior
coalition partner, Paulo Portas, deputy prime minister, averting
a renewed spiral in the euro zone's debt crisis.
Portas said "the country has a reduced room for manoeuvre"
as it heads for the bailout exit and would have to restrain
spending to enable any future tax cuts.
After spiking to over 8 percent due to the political
turmoil, Portugal's benchmark 10-year bond yields have rolled
back and were nearing the end of July at 6.4 percent, around the
level where they started.
Under its bailout goals, Lisbon must cut its budget deficit
to 5.5 percent of gross domestic product this year from last
year's 6.4 percent, and then reduce it to 4 percent in 2014.