Portugal election race focuses on austerity as govt gains

By Axel Bugge LISBON (Reuters) - Portugal's centre-right prime minister attacked his Socialist opponent as the candidate of instability in a television debate on Wednesday after their election race swung in the government's favour with a new poll showing it in the lead. The poll suggested for the first time that the centre-right coalition could return to power in an Oct. 4 election focused on how to consolidate Portugal's success at leaving a debt crisis and financial bailout behind and return to growth. All previous polls so far have shown the two sides stuck within the margin of error. Portugal has been called a European poster child at reform and austerity under the bailout that it exited last year, sharply contrasting it with Greece, which not long ago some analysts feared it would join in an economic abyss. Portugal's debt levels are still some of the highest in Europe. The evening debate between Prime Minister Pedro Passos Coelho and Socialist leader Antonio Costa showed the campaign was increasingly becoming a referendum on the austerity policies of the past years versus the uncertainty of a new government. There was no clear winner in the debate. "Families are filled with anguish by the possibility that what has been achieved will be put at risk," said Passos Coelho in the only televised debate of the campaign between the two. "For most Portuguese Doctor Antonio Costa represents uncertainty." Passos Coelho's government introduced the sharpest tax hikes in living memory and launched sweeping economic reforms under the bailout, setting the stage for the country to return to growth in 2014 after three years of recession. But Costa has promised to ease austerity and boost voter's disposable incomes. "The Portuguese have two very clear choices; continue with austerity policies and vote for the rightist coalition or turn away from continuity and vote for the Socialists," said Costa. The poll published on Wednesday showed that the Socialists had slipped, to 33.3 percent from 38 percent in July, suggesting promises of change were not catching on. The poll put the two parties in government, the Social Democrats and junior partner the CDS-PP, at a combined 38.9 percent, up from 37.8 percent in July. The poll was welcome news to Passos Coelho, who if re-elected would break the trends seen in Spain and Greece where governments that have enacted harsh austerity have been punished. Portugal was forced to seek the bailout in 2011 after the previous minority Socialist government failed to pass economic policies in parliament, which led to its collapse. Antonio Costa Pinto, political analyst at the University of Lisbon, said the rise in the poll for the government was based on fear of instability and the economic recovery. "There is a part of the electorate that may vote for the government as it fears that the Socialists will not obtain a majority (in parliament) and that would lead to political instability," said Costa Pinto. "That's why the coalition is sending out a message of security, continuity and stability." The Aximage poll surveyed 602 people from Sept. 4 to 7 and had a margin of error of 4 percentage points. It was published in daily Jornal de Negocios. (Additional reporting by Shrikesh Laxmidas and Sergio Goncalves,; Editing by Alison Williams, Hugh Lawson and Ken Wills)