Portugal managed to raise €1.85 billion ($2.4 billion) in a debt auction Wednesday despite the country's bleak economic prospects and growing political tension over austerity policies.

The Public Debt Agency said it sold 3-, 6- and 12-month Treasury bills, with interest rates on the shortest and longest bills sharply lower though the 6-month rate was up on the last auction.

The coalition government forecasts a third straight year of recession next year, predicting a 1 percent economic contraction, but its draft budget for 2013 compounds the austerity program with steep tax increases that would cost many workers the equivalent of at least a month's pay and likely further stifle consumption. The jobless rate, already at a record 15.9 percent, is seen rising to 16.4 percent next year.

A broad outcry over the budget proposal has strained relations between the senior and junior parties in the center-right coalition, respectively the Social Democratic Party and the Popular Party.

The Social Democrats insisted their governing partner endorsed the budget plan. But the Popular Party's vice president, Jose Manuel Rodrigues, said his party's members of government didn't give their blessing to the tax hikes and would try to change them during discussions in Parliament ahead of a vote later this month. Without its partner, the Social Democratic Party doesn't have enough votes to approve its proposal.

Portugal was close to bankruptcy when it was engulfed by the eurozone's financial crisis and asked for a €78 billion rescue last year following a decade of feeble growth and mounting debt.

To get the bailout money, which is delivered in batches, Portugal must abide by promised deficit cuts and economic reforms.

Finance Minister Vitor Gaspar said earlier this week his budget proposal was necessary to cut the deficit to its 4.5 percent target in 2013. In 2010 the deficit was 10.1 percent.

In the bond auction, the debt agency said there was demand for eight times the amount of 3-month bills offered. It sold €250 million of those bills at a rate of 1.366 percent — down from the 3.845 percent in a similar sale in February.

The rate on the 12-month bills also fell, to 2.101 percent from 3.5 percent in July, and the agency sold €770 million of those bills.

The 6-month bills sold at a rate of 1.839 percent for €830 million. That was up from the 1.7 percent Portugal paid last month.

"There was no negative impact from the current political and budget circumstances," said Filipe Silva, debt manager of Lisbon-based financial group Banco Carregosa. He attributed the mostly lower rates to the possibility of European Central Bank help for debt-heavy eurozone countries, which has recently helped drive down loan rates for Spain and Italy.

The interest rate Portugal pays on its 10-year bonds, viewed as a benchmark of investor confidence, has fallen over this year. The rate was around 8 percent Wednesday, down from more than 17 percent in January.