The defeat is likely to trigger a bailout similar to the rescue packages Greece and the Republic of Ireland had to accept last year.

All five opposition parties voted against the austerity measures, which included spending cuts and tax rises.

Mr Socrates had earlier said he would no longer be able to run the country if the budget was not adopted.

Elections are likely to take place in a few months' time.

Mr Socrates, from the centre-left Socialist Party, presented his resignation to President Anibal Cavaco Silva two hours after the vote in parliament.