The rally was organized by Portugal's largest union, the 750,000-strong CGTP, which has not signed a pact agreed this week by other unions and the government on the labor market reforms.

"There will be no letup," CGTP leader Manuel Carvalho da Silva told a crowd of 2,000 gathered near the parliament building. The activists marched through downtown Lisbon under banners "No to forced labor, no to firings!."

The union plans a major rally in Lisbon on February 11 and has promised close scrutiny of the reforms, which it called "hellish," when they are discussed in parliament.

The proposed reforms aim to make firing and hiring easier and reduce compensations for layoffs and holidays. They are designed to increase competitiveness and help struggling businesses as Portugal suffers its worst recession since the 1970s.

The country's second largest union, UGT, and other labor and business organizations signed the pact Wednesday, making it fairly credible. Still, CGTP's opposition suggests anti-austerity protests may grow.

Prime Minister Pedro Passos Coelho called the pact signing "a day that marks the history of a country that managed to unite to confront challenges."

But Carvalho da Silva called it a "sad day in history."

"This is against progress, development, human dignity and the value of work," the union leader said of the pact.

The country promised reforms in its labor market and slow-paced justice system when it signed a 78-billion-euro ($100 billion) bailout deal last May.

Social unrest has been tame so far in Portugal compared to Greece and other crisis-hit countries in Europe. A general strike in November had little impact in the private sector.

(Reporting By Andrei Khalip and Daniel Lavarenga; Editing by Alessandra Rizzo)