Portugal: Harsh Cuts To Follow Election

Portugal's centre-right Social Democrats (PSD) have won the country's election after promising a severe austerity programme to try and ease financial problems.

Leader Pedro Passos Coelho has vowed to do "everything possible" to honour conditions attached to a �?�78bn bailout agreement reached last month between Lisbon, the International Monetary Fund and the European Union.

The deal includes tight deadlines for the country to impose deep spending cuts and economic reforms.

Amongst measures called for in the three-year bailout plan are tax increases, a freeze on state pensions and salaries and a reduction in the amount and duration of unemployment benefit.

Passos Coelho campaigned on the promise to "go beyond" the measures.

He has said he will add more state-owned companies to a list of those to be sold - including the national water company and the Lisbon metro.

He also wants to introduce a programme encouraging people on benefits to do community work.

In his victory speech he said: "I want to guarantee to those who are watching us from abroad that Portugal does not intend to be a burden in the future to other countries that lent us the means that we needed today to face up to our responsibilities."

Although the debt-reduction measures are expected to put the country into a deep recession and lower living standards in one of western Europe (Chicago Options: ^REURTRUSD - news) 's poorest countries, parties that supported the tougher measures won around 80% of the total vote.

The PSD won 40% of the vote, compared to 28% for the Socialist party, which was in power since 2005.

Passos Coelho said he would form a coalition government with the smaller, conservative CDS (SNP: ^CDSY - news) -PP (Jakarta: PTPP.JK - news) which won 11%.

That would give them a majority in the 230-seat parliament.

The two parties have worked together in the past, and ruled as a coalition between 2002 and 2005.

Passos Coelho said "Portugal is living in extraordinary circumstances.

"We all know that the great need for change that the country has demonstrated is not a need to look back and set the score with the past, it is an unmistakable will to open a window of hope towards the future."

Outgoing Prime Minister Jose Socrates resigned as leader of the Socialists before the final results were declared, saying he wanted to give the party space to select a new leader.

"This defeat is entirely mine and I want to assume full responsibility for it," he said in an address to party supporters in Lisbon.

The early election was triggered at the end of March after the 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 euro zone nation, after Greece and Ireland (Berlin: IIK.BE - news) , to request an international bailout.