Portugal goes to the polls with voters resigned to austerity

LISBON - Portugal goes to the polls on Sunday with voters hesitating between re-electing the ruling centre-right coalition that steered the country through a punishing bailout and the Socialists who promise to ease austerity.

Prime Minister Pedro Passos Coelho's "Portugal Ahead" coalition of his centre-right Social Democratic Party and the conservative Popular Party has made a surprising comeback in opinion polls, with most putting it ahead despite overseeing harsh spending cuts.

The coalition, in power since 2011, has 35.5 to 40.3 percent support, against 31.8 to 36 percent for the main opposition Socialists led by Antonio Costa, a popular former mayor of Lisbon, according to the latest surveys - an unimaginable score just a few months ago.

But with one in five voters still undecided, pollsters say the outcome of the election remains uncertain and neither side is likely to win an absolute majority in the 230-seat parliament.

Analysts warn Portugal risks a period of political instability just as it seeks to safeguard an economic recovery after emerging from a debt crisis.

"The absence of an absolute majority, along with the lack of a clear direction, could be a negative sign for markets," said Paula Carvalho, chief economist at Portuguese bank BPI.

Greece crisis impact

Passos Coelho, a 51-year-old economist, is campaigning on his record of having steered the country safely through the debt crisis and to a return to growth last year after three years of recession.

When he came to power in June 2011 Portugal was on the verge of defaulting on its mountain of debt.

His Socialist predecessor, Jose Socrates, had just asked for a 78-billion-euro ($88-billion) bailout from the European Union and the International Monetary Fund, making it the third eurozone country after Ireland and Greece to receive a financial rescue package.

Portugal exited the bailout scheme in May 2014 but only after the government imposed harsh austerity and the biggest tax hikes in living memory.

The jobless rate has fallen to 12 percent from a peak of 17.5 percent at the beginning of 2013.

"After the crisis, an economic recovery emerged, which plays in favour of the governing coalition," political analyst Jose Antonio Passos Palmeira told AFP.

But the recovery has yet to be felt on the streets. One in five Portuguese continue to live below the poverty line with an income of less than 5,000 euros per year.

Unlike neighbouring Spain or Greece, Portugal has not seen the rise of a protest party strong enough to challenge traditional parties at the polls.

The Greek crisis, which has been followed very closely by Portuguese voters, could even give a boost to the ruling centre-right coalition.

"The attempt by Greece's Syriza party to put an end to austerity has failed. Suddenly Portuguese voters see that there really is not alternative" to austerity, said Passos Palmeira.

Risk of instability

While Portugal's Socialists have pledged to ease back on austerity and give more disposable income back to households by lowering personal taxes and reversing public sector pay cuts, the party has promised to stick to European budget rules.

To reassure voters Costa, the party's 54-year-old leader, has had to distance himself from Socrates, who served as prime minister from 2005-2011.

Socrates, 58, was detained in November 2014 on suspicion of corruption and money laundering and is currently under house arrest.

Costa hardened his tone in the final weeks of the campaign, saying his group would vote against the budget if the centre-right is re-elected.

Passos Coelho responded by warning that such a move could cause "instability that could lead to new elections in a very short time." The Socialists could block a minority centre-right government by joining forces with the Left Block and the Communists which together have about 15 percent support.

With apathy gripping many voters, pollsters predict the numbers opting to stay at home may even surpass the record 41.9 percent recorded in the last election.

"I don't vote anymore for anyone. It is always the same parties, the same promises, and nothing changes," said Herminio Batista, a 72-year-old pensioner.