LISBON (Reuters) - Portugal's Prime Minister Pedro Passos Coelho has invited the main opposition Socialists to discuss efforts to shrink the budget gap, aiming to convince investors that next year's election won't derail the policy.
After Lisbon's international bailout ends this year, its finances will still be bound by deficit reduction targets set by the 2012 European Union fiscal stability treaty.
The centre-left Socialists have supported the European treaty but say budget consolidation should be based on growth and not the spending cuts defended by the centre-right government. Despite the gaping differences in approach, the party has recently shown itself more open to dialogue.
"The Socialist party ratified this budget treaty, but now it's time to move on to acts from words," Passos Coelho told a conference on Wednesday.
Portugal's debt yields have fallen to their lowest level since April 2010 this week, helped by improving sentiment about the euro zone as a whole, as well as Portugal's economic recovery and the prospects of a smooth bailout exit in May.
Lisbon has to cut the budget deficit to 4 percent of gross domestic product (GDP) this year from last year's 5 percent plus, then to 2.5 percent in 2015 and gradually to 0.5 percent in 2017.
Passos Coelho has promised to present a strategy document by the end of April, covering until at least 2017, and to provide economic and fiscal data later this month to ensure talks with Socialists are "productive".
"It makes sense to have a dialogue with the main opposition party on this strategy, the rules to be defined, the path in terms of budgeted programmes and quantitative limits for discretionary spending... We are totally open to a discussion."
The Socialist party has recently began talks with the government on priority public infrastructure projects and its leader Antonio Jose Seguro said the administration has to present its budget ideas while his party "will present its own".
Opinion polls show the Socialists a few points ahead of the ruling coalition, but without enough support to win an outright majority. Analysts generally expect the course of budget consolidation to continue regardless of the outcome.
(Reporting by Andrei Khalip and Sergio Goncalves, editing by Axel Bugge/Ruth Pitchford)
