Portugal's election race overshadowed by political risk

Jessica Morris
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The centre-right ruling coalition is economic record (Source: Getty)

Portugal's election race is taking place amid mounting political risk, which could jeopardise the country's recovery from its debts crisis, as polls suggest that no party is on course to achieve a majority government.

Prime Minister Pedro Passos Coelho has accused the main opposition Socialist leader, Antonio Costa, of "promising instability". Costa has vowed to block any budget proposed by a minority centre-right government.

Credit ratings agency Standard & Poor's recently upgraded Portugal to just below investment grade, due to the country's recovery from a debt crisis which it exited last year. But analysts did warn of a possible downgrade if the new government deviated noticeably from budget consolidation.

It comes as Greece's leftist Syriza party looks set to re-enter office, having secured a mandate for the terms of its €86bn (£62bn) bailout programme. Unlike Greece, Portugal introduced sharp tax hikes and sweeping reforms under its bailout, which helped its economy return to growth last year.

Read more: The bell is tolling for Greece – but it’s tolling for Europe now too

Consequently Passos Coelho's centre-right ruling coalition is campaigning on its record of having steered Portugal safely through a debt crisis.

But opposition Socialist leader Antonio Costa is pledging to ease austerity, and give more disposable income back to households.

Portugal had been forced to seek a bailout in 2011, after the previous minority socialist government failed to pass economic policies in parliament, leading to its collapse. So far austerity hasn't sparked the widespread resistance seen in countries such as Greece and Spain.

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