UPDATE 2-Portugal PM threatens to resign if parliament passes teachers pay hike

Portuguese Prime Minister Antonio Costa threatened to resign on Friday after his leftist allies abandoned the government in a parliamentary vote that could undermine efforts to balance the budget by raising teachers' salaries retroactively. Late on Thursday, a broad alliance of lawmakers sitting on a parliamentary committee voted to grant teachers salary increases held back over several years since 2005.

Costa called an emergency government meeting on Friday, after which he met President Marcelo Rebelo de Sousa for an hour and informed him that he would resign if parliament gives its full approval to the measure. "Under these conditions, I thought it was my duty to inform the president and the head of parliament that the final approval of this initiative will force the government to submit its resignation," Costa said in a televised address to the nation.

Parliament will hold a full vote on the measure in a session on May 15. The measure would not impact this year's budget. Losing the support of the far left Communists and Left Bloc in parliament would make it hard for the Socialists, who rule in a minority, to approve laws. Portugal is due to hold a national election in October.

"It is clear dramatisation on behalf of the government," said political scientist Antonio Costa, adding it would be a risk to the leftist parties if the government resigns. "We are six months from a general election and there is no clear benefit for the Socialists from moving it closer." Costa has relied on the far left allies since reaching an agreement with them when he came to power in 2015.

A key concern by the government is that paying such retroactive salary hikes to teachers could lead to other civil servants asking for the same thing, leading to growing pressure on the budget. A leading union representing police said that any pay hikes for teachers should include all public sector workers.

Left Bloc leader Catarina Martins said in a Facebook post that "it appears there are attempts to create an environment of a political crisis. This environment is totally artificial". Wages for all of the country's civil servants, including teachers, were frozen during the country's debt crisis, a measure not reversed until last year. (Additional reporting by Andrei Khalip; Writing by Axel Bugge and Andrei Khalip; Editing by Alison Williams)