Portugal votes in early election overshadowed by bailout

Portugal voted Sunday in an early election to decide who will implement a 78 billion euro bailout deal, with the centre-right opposition the favourites to win after six years of Socialist rule and the country’s near financial collapse.

Final surveys published Friday gave the Social Democrats (PSD), who last ruled between 2002 and 2005, around 36 percent of the vote against 31 percent for Prime Minister Jose Socrates’ Socialists.

If confirmed the PSD would fall short of an absolute majority in the 230-seat parliament but they could govern in coalition with the third-place conservative CDS-PP party as they have in the past.

The PSD campaigned on a promise to “go beyond” the demanding bailout conditions set by the International Monetary Fund and the European Union in terms of privatisations and economic reforms.

During the final week of the campaign, PSD leader Pedro Passos Coelho warned that if Socrates is re-elected Portugal would find itself in the same “tragic” situation as Socialist-run Greece, which is seeking an additional bailout.

“We have to re-establish confidence in Portugal,” he said during his final campaign rally late Friday in a packed square in central Lisbon.

“We will fulfill the agreement reached with the European Union and International Monetary Fund until the last paragraph, until the last deadline, and we will pay what was asked for in our name until the last euro.”

Investors have kept Portugal’s borrowing costs close to record levels even after the bailout agreement was reached in May on fears that the new government that emerges after the election may lack a strong enough mandate to get parliament to pass the austerity and reforms called for in the deal.

The early election was triggered by Socrates’ resignation at the end of March after the parliamentary opposition, led by the PSD, rejected his minority government’s fourth austerity package in just under a year.

Two weeks later Portugal became the third eurozone nation after Greece and Ireland last year to request an international bailout because of its inability to meet its refinancing obligations.

Socrates argues he did everything to avoid a bailout. He blames the PSD, which had backed previous fiscal tightening, for provoking a political crisis that worsened the debt crisis just to topple the government “out of a greed for power.”

The outgoing prime minister accuses Passos Coelho of seeking to use the bailout package as an excuse to implement “the most right-wing programme ever proposed in Portugal.”

The bailout is conditional on austerity measures that include tax hikes, a freeze on state pensions and salaries and a reduction in unemployment benefits as well as their duration.

The new government will have to fight joblessness — which stood at a record 12.6 percent in April, the fourth-highest level in the eurozone — with the economy expected to contract by two percent this year and the next.

With the loan package expected to handcuff Portugal’s next government, many voters questioned the point of casting their ballot.

“How relevant are these elections going to be? Hasn’t our future already been decided by creditors like the IMF? Is it even worth voting?” asked economist Joao Cesar das Neves in an opinion column published last Monday in the Diario de Noticias daily, reflecting a widely expressed view.

Polling stations opened at 8:00 am (0700 GMT) and will close at at 7:00 pm, with first official results expected some two hours later.