Portugal asks voters - "To build or not to build?"

* Large railway, airport projects key in Sept. 27 election

* Projects to create jobs, but also boosts debt further

* Previous big infrastructure projects disappoint, some say

By Axel Bugge

LISBON, Sept 22 (Reuters) - Portugal's love-hate relationship with major infrastructure projects may hold the key to this week's election as political opponents battle over the best way to narrow the widening wealth gap with EU partners.

Socialist Prime Minister Jose Socrates has thrown his re-election hopes behind a new international airport for Lisbon and a high-speed TGV rail line to Spain, betting such projects can vault the economy into sustained, job-creating growth.

His centre-right opponent, Social Democrat Manuela Ferreira Leite, has pledged a fight of "titanic" proportions to stop the projects from going ahead, fearing an explosion of debt.

"When you go to vote ... what is at stake now is to say 'yes' or 'no' to the third bridge," Socrates said last week while campaigning in a town across the Tagus River south of Lisbon, which stands to benefit from a planned railway bridge.

Socrates defends a strong state role state in the economy, while Ferreira Leite wants to reduce that role and "change the current model of economic development" which has depended on rising private and public consumption.

Rating agencies seem to be on her side -- they have warned about the poor state of Portugal's public finances due to the global crisis -- while the electorate narrowly favours the Socialists' vision. The latest poll showed 34.9 percent support for them against the Social Democrats' 31.6 percent.

At a time of the worst economic recession in decades and unemployment at 9.1 percent and rising, the Socialists' appeal is powerful -- the TGV rail project is seen generating 100,000 jobs during the construction phase alone.

DOUBTS

But many economists and industry experts have doubts. They say the typical crisis-time debate between supporters of spending plans and those who fear soaring debt levels is twisted by the election factor.

"Sadly, in the political debate, the public works projects are used as heavy artillery and it is not in the current situation that these plans can be considered in an adequate form," said Fernando Santo, head of the Engineers' Association.

"Public works are not an end in themselves, whether they benefit company A or B. We need to focus on our resources to create wealth and I think Portugal has failed in this," he said.

UBS said in a research note that support for infrastructure projects represented by a victory for the Socialists would be good news for building firms including Mota-Engil (MOTA.LS), Soares da Costa (SCOAE.LS) and Cimpor (CPR.LS).

But Santo and many others point out that Portugal has spent billions on large infrastructure projects such as motorways in the past decade without seeing what they say are clear, lasting economic benefits.

Portugal's economy sharply underperformed the rest of Europe in the past decade, before the global crisis, because of its own, home-grown debt blow-out in the early 2000s.

The result was that Portugal won the unenviable distinction of becoming the first country to breach the euro's budget deficit limit of 3 percent of gross domestic product in 2004.

In the period from 2001 to 2005, Portugal's gross domestic product posted average growth of 0.9 percent, far below the euro area average of 1.5 percent, according to EU statistics.

That underperformance continued in 2006, 2007 and 2008 and has contributed in no small part to establishing Portugal as western Europe's poorest country with GDP per capita of 15,600 euros, nearly half of the euro area average of 28,300. Public debt is seen rising to about 75 percent of GDP this year from 66.4 percent in 2008.

That leaves many questioning the results of all the funds channelled in recent years into projects such as Portugal's vast, and some say underused, motorway network.

"We are clearly carrying out excessive public works," said Jose Manuel Viegas, a professor at the Higher Technical Institute. "The road network is clearly the least justifiable."

An editorial in daily Publico summed up the choice for voters more directly, "Above the costs and benefits (of the projects), the confrontation is between facing the country's near-term future with caution or a spirit of adventure." (Additional reporting by Shrikesh Laxmidas; Editing by Louise Ireland)