PORTUGAL’S PRIME MINISTER has resigned after opposition parties overwhelmingly defeated his last-ditch austerity budget, aimed at preventing the eurozone’s weakest economy from plunging into chaos.

All opposition parties united to defeat the minority Socialist Party government, led by prime minister Jose Socrates’, saying the government’s continued belt-tightening had simply gone too far for the public to bear.

The vote means that Portugal is much more likely to be forced to seek a bailout like those accepted by Greece and Ireland last year, and places Spain in genuine danger of having to follow suit.

In a live televised address, Socrates said he had always pledged to resign if the package was rejected by the 230-member Assembly of the Republic.

“As a consequence, I have tendered my resignation,” Socrates said, adding that the opposition “took away the government’s ability to continue running the country.”

Socrates’ latest budget was his fourth in 11 months, as Portugal scrambled to avoid the embarrassment and financial consequences of asking for outside help to prop up its shaky economy.

Portugal’s problems could hurt efforts by European leaders seeking to prop up confidence for the eurozone itself, and is set to cause even more turbulence for the Eurozone.

Given the weakness of the Portuguese economy, many investors believe Spain – the Eurozone’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 today, 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 that summit.

Additional reporting by AP