Portugal vote winner to face daunting job under bailout

Reuters News
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Posted: Jun 04, 2011 7:33 AM
Portugal vote winner to face daunting job under bailout

By Shrikesh Laxmidas

LISBON (Reuters) - Portugal's Social Democrats are favorites to win a general election on Sunday, but celebrations could be short as they face the urgent task of forming a coalition government to enact a demanding bailout plan.

Polls suggest the center-right Social Democrats (PSD) will win the vote but not a full majority. They will have to team up with the rightist CDS-PP to form a coalition and implement the measures set by a 78-billion-euro ($112.5 billion) bailout agreed with the European Union and the International Monetary Fund last month.

Socialist Prime Minister Jose Socrates, who has been in power since 2005, appears headed for a humbling defeat following his resignation in March and subsequent request for a bailout which he had resisted for several months.

A tough fighter, Socrates blamed the opposition for triggering the bailout request by blocking his party's austerity package, but voters seem to have tired of his excuses for the dire state of the economy and his handling of the debt crisis.

"Socrates has to take most of the blame for the situation we are in. He simply did not react quickly enough," Nuno Almeida, 34, an office worker in Lisbon, said.

With the three-year bailout imposing additional steep spending cuts, tax rises and cutbacks on workers' rights, PSD leader Pedro Passos Coelho is expected to have very little time to settle into the job of prime minister.

"I doubt the next government will last for the whole four-year mandate. Workers are going through a tough phase, and the government will have room to maneuver, but it will always have to act within the harsh terms of the agreement," Anibal Ribeiro, 52, a bank clerk from Guarda, said.

The new government will have to combat joblessness -- which at 12.4 percent is the highest on record -- and rising social discontent with the economy expected to contract by 2 percent this year and again in 2012.

If he wins, Passos Coelho also will have to manage the cabinet relationship with CDS-PP's show-stealing leader Paulo Portas and possibly negotiate with the defeated Socialists to obtain broad support on critical austerity measures.

Opinion polls show, however, that the race is still tight enough for Socrates to produce a surprise win, though without a full majority.

That would worry markets, which believe Portugal needs a government with a strong mandate to ensure it can pass the bailout measures in parliament.

(Additional reporting by Daniel Alvarenga; editing by Axel Bugge and Michael Roddy)