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Europe faces the risk of a second revolt by Left-wing forces in the South after Spain's, Portugal’s Socialist Party vowed to defy austerity demands from the country’s creditors and block any further sackings of public officials. "We will carry out a reverse policy,” said Antonio Costa, the Socialist leader.  Mr Costa said a clear majority of his party wants to halt the “obsession with austerity”. Speaking to journalists in Lisbon as his country prepares for elections - expected in October - he insisted that. Portugal must start rebuilding key parts of the public sector following the drastic cuts under the previous EU-IMF Troika regime. The Socialists hold a narrow lead over the ruling conservative coalition in the opinion polls and may team up with far-Left parties, possibly even with the old Communist Party.  “There must be an alternative that allows us to turn the page on austerity, revive the economy, create jobs, and – while complying with euro area rules – restore hope to this county,” he said. The plan would appear entirely incompatible with the EU’s Fiscal Compact, which requires Portugal to run massive primary surpluses to cut its public debt from 130pc to 60pc of GDP over 20 years under pain of sanctions. The increasingly fierce attacks on austerity in Lisbon are likely to heighten fears in Berlin that fiscal and reform discipline will break down altogether in southern Europe if Greece’s rebels win concessions. Worry about political "moral hazard" is vastly complicating the search for a solution in Greece. “Greece is the testing ground and everybody is watching very carefully. That is why the Spanish and Portuguese prime ministers have been so hawkish,” said Vincenzo Scarpetta, from Open Europe.