Portugal election: Vote amid bail-out austerity

Voters in Portugal are going to the polls to choose a new government which will implement a demanding 78bn euro ($116bn; £70bn) bail-out.

Opinion polls suggest the opposition centre-right Social Democrats (PSD) lead the governing Socialists, but not by enough to form a majority.

Analysts say the PSD may try to form a coalition with the third-ranked CDS.

All the main parties endorsed the bail-out, which requires tough austerity measures amid a faltering economy.

Socialist leader Jose Socrates resigned as prime minister in March, triggering early elections after the opposition in parliament rejected his minority government's fourth austerity package in less than a year.

Since then, he has acted as caretaker prime minister.
'Politically difficult'

Portugal is faced with unemployment of more than 12% and an economy that is expected to contract by 2% this year and next.

Polls suggest the centre-right Social Democrats will win nearly 37% of the vote, compared to about 31% for the Socialists.

Party leader Pedro Passos Coelho suggested this week that he was the preferred candidate of donors to the bail-out fund.
Social Democrat leader Pedro Passos Coelho campaigns in Lisbon - 3 June 2011 Social Democrat leader Pedro Passos Coelho said he would cut wasteful state spending

"We are going to cut state waste and excesses while finding a way for the needy to get what they need," he told supporters.

Mr Socrates has accused the Social Democrats of pursuing a "radical right-wing agenda" and criticises Mr Passos Coelho for lacking experience in government.

"If you think social protection programs are important, vote for the Socialist Party because our policies ensure the welfare state," he told a party rally on Friday.

Whoever wins on Sunday will have to enact urgent and far-reaching social and fiscal reforms, including more austerity measures, to restore national fiscal health and encourage growth.

The terms of the bail-out call for tax hikes, a freeze on state pensions and salaries and cuts in unemployment benefits.

"The road with this package is long and filled with reforms which may be politically difficult to pass," Diego Iscaro, an economist at IHS Global Insight, told Reuters news agency.