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Local elections blow to government

Portuguese voters have handed the coalition government a heavy defeat in local elections, apparently reflecting widespread public opposition to austerity measures and workplace reforms following the country's 78 billion-euro (£65bn) bail-out.

With just over 60% of votes counted, the centre-right Social Democratic Party, the coalition's senior partner, had 22% of the national tally of votes compared with 38% for the centre-left Socialist Party, the main opposition in parliament. The Socialists are demanding less austerity and more investment in economic growth. Complete results from the votes are expected today.

Around 9.5 million voters are electing representatives on 308 local authorities and more than 3,000 parish councils.

Though votes in the local races have no direct bearing on the make-up of the national government, the ballot was seen as reflecting the public mood amid a jobless rate of 16.5%. A third straight year of recession is expected for 2013, after a 3.2% contraction last year that was the country's worst economic performance in almost 40 years.

The government's defeat could add to its difficulties enacting the 2011 bail-out agreement, which demands pay and pension cuts, tax rises and reductions in public services. That may help prolong efforts by the 17 countries that share the euro currency to end their three-year-old debt crisis.

But Antonio Barroso, a London-based analyst with Teneo Intelligence political and business risk firm, said he did not expect the election to "crucially affect" the government's room for manoeuvre.

"It could have been much worse" for the Social Democrats, he said, and "the Socialist Party could have done much better" given the widespread hardship.

The Social Democrats govern with the smaller Popular Party.

The absence of a broad political consensus on how to restore the country's fiscal health has hurt Portugal on international financial markets. In a sign that investors are jittery, creditors have recently driven higher the interest rate Portugal pays on its loans.

Fears also have grown that Portugal, which is supposed to resume borrowing money on the open market in the middle of next year after correcting its public finances, may need a second bail-out.

Despite two years of austerity policies, the government has repeatedly missed deficit reduction targets. The three major international ratings agencies still classify Portugal's credit worthiness at junk status.

Prime minister Pedro Passos Coelho made no immediate comment, but he has previously vowed to press ahead with the bail-out programme even if his party performed poorly at the polls.

Socialist spokesman Miguel Laranjeiro said his party "is the big winner on this election night, and the Social Democrats are the big loser".

The government has to lop another 3.6 billion euros (£3bn) off the state budget next year, when the retirement age will increase to 66 from 65. That is likely to bring more strikes and street protests.

AP

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