Portugal's parliament has approved the biggest tax increases in the country's modern history.

The move paves the way for a court battle over a budget that the government says is vital for keeping its international bailout afloat.

The government of Prime Minister Pedro Passos Coelho has searched for ways to guarantee revenues in order to meet budget goals set under the €78bn bailout deal with the EU and IMF.

All politicians present from the two parties in the centre-right ruling coalition voted for the budget at its first reading while all other parties, including the opposition Socialists, voted against in parliament.

The budget sets Portugal, which this year is suffering its deepest recession since the 1970s, on course for a third year of economic contraction in 2013 as households face higher taxes and record unemployment of over 15%.

The 2013 budget, which raises tax rates on income, property and financial transactions, was the government's third attempt in recent months to ensure its budget goals are met.

Some households face tax increases equivalent to two months' salary.

The budget is now expected to face an almost certain challenge in the constitutional court on the grounds that the tax increases weigh too heavily on the poor.

The court threw out one austerity plan in July and a second was abandoned after street protests.

Political tension has been increasing and anti-austerity demonstrations have become more common in recent weeks in Portugal, which despite being one of the country’s worst hit by the eurozone crisis had so far escaped unrest of the sort seen elsewhere.

Unions and 'Indignados', a group of young unemployed people, staged protests in front of parliament today.

A few hundred had gathered by the time the vote took place, shouting anti-government slogans.

Mr Passos Coelho said the 2013 budget aimed to help Portugal to "turn the page on one of the most difficult periods of our history", but the tax increases will cause even greater problems for ordinary Portuguese.