LISBON The Portuguese government is working on measures to replace a social security tax hike which has been dropped after sparking the first widespread opposition to austerity measures.
Prime Minister Pedro Passos Coelho also said after meeting unions and business confederations on Monday that he would continue talking to them about alternative income tax and capital tax measures.
Portugal still faced tough austerity measures to ensure it met the terms of a 78 billion euro ($101 billion) bailout from the European Union and IMF last year, Passos Coelho said.
"As long as Portugal maintains its level of fulfillment, we know that we will have the support of our external partners. If we do not, we put at risk our fulfillment, and these guarantee mechanisms will cease to exist," he said in televised remarks.
The government was forced to back down on a plan announced two weeks ago to raise social security contributions to 18 percent from 11 percent for all workers in 2013, with a similar sized cut in companies' social security contributions.
The measure sparked the biggest protests since Portugal received its bailout.
($1 = 0.7699 euro)
(Reporting By Axel Bugge and Daniel Alvarenga; Editing by Dan Lalor)