FACTBOX-Key political risks to watch in Portugal

LISBON, March 1 (Reuters) - Portugal's minority government is facing growing investor and peer pressure to request an international bailout to ease its debt crisis, which could transform the political landscape in the coming months. Prime Minister Jose Socrates is resisting such a move, at least on the terms that were imposed on Greece and Ireland. He hopes an austerity drive will convince markets the country can solve its problems on its own, helping to push borrowing costs lower from euro lifetime highs.

The minority Socialist government, with the acquiescence of the main opposition Social Democrats (PSD), pushed through the austerity guidelines for 2010-2013 and the 2011 budget bill. It combines spending cuts and tax increases to soothe investor fears about the country's ability to rein in its budget deficit. The agreement with the PSD has won some time for the government but the respite could be short-lived, especially if Portugal is forced to go cap in hand to the European Union and the International Monetary Fund.

Below are some political risk factors to watch:

OPPOSITION PUSHES FOR SNAP ELECTIONS

The PSD could push for snap elections if opinion polls consistently show it can get the absolute majority of parliament seats. It is ahead in opinion polls and some have shown it reaching an absolute majority. [ID:nLDE71O0MK]

The government's normal term finishes at the end of 2013.

The PSD has refused to support a no-confidence motion proposed by the small Left Bloc party, which is to be voted before mid-March, but it could support a similar motion if it comes from another party such as its traditional ally, the CDS-PP. In that case, the motion's success would depend on the left wing.

A request for a bailout could be the trigger for a no-confidence vote that could be fatal for the government after the trauma caused by the Fund's draconian measures imposed on Portugal in the 1980s. At that time, the impact was tough spending cuts, lost purchasing power and a currency devaluation. [ID:nLDE70A19Q].

PSD leader Pedro Passos Coelho has sent mixed messages on the political outlook, saying he is not in a rush to grab power and is willing to give the government time to implement the austerity measures, but also saying that he could govern under an IMF intervention.

What to watch:

-- Socrates meeting Germany's Chancellor Angela Merkel on March 2 about the European Financial Stability Facility. EU summits on March 11 and 24-25 on anti-crisis mechanisms.

-- The evolution of voting intentions in opinion polls as austerity kicks in. Can the PSD muster the absolute majority?

PRESIDENT DISSOLVES PARLIAMENT OR SACKS GOVERNMENT

Recently reelected President Anibal Cavaco Silva has largely ceremonial powers, but can dissolve parliament and sack the government under a vaguely-worded constitutional clause assuming a case when "democratic institutions are at risk". He has said that if the IMF has to intervene that would mean that the government has failed, although he has described his role as the guarantor of stability in the country and said he is reluctant too use "the atomic bomb" of parliament dissolution.

What to watch:

-- Any open criticism of the government by Cavaco would be unusual and a possible sign he may try to replace the premier.

DEFICIT CUT TEST AND GROWTH

Markets remain focussed on the government's ability to implement austerity, especially on the spending side. The PSD has also said it would closely monitor the budget's execution for any signs of failure to implement the cuts, which means it could serve as a pretext for a no-confidence vote.

The government says it beat last year's budget deficit target of 7.3 percent of GDP after 9.3 percent in 2009, but is yet to present the full official data with the final figure.

Although it met the target, it used pension fund assets to help close last year's gap, a move that has been criticised by the opposition and analysts as an accounting trick. Markets are also looking closely at economic performance, with many analysts and the Bank of Portugal expecting the austerity to throw the country into a new recession this year after last year's growth of 1.4 percent. The government still forecasts a modest 2011 growth of 0.2 percent.

Although Portugal's public debt -- estimated to have ended 2010 at about 82 percent of GDP -- is much lower than Greece's, economists worry that it could rise fast if there is an extended recession, which would also make budget goals harder to meet.

Finance Minister Fernando Teixeira dos Santos has promised the debt ratio will start to drop in 2012, but some economists warn it could reach close to 100 percent of GDP in that year.

What to watch:

-- Monthly budget execution and final 2010 budget deficit.

-- Evolution of exports as main source of projected growth.

-- Oil prices after government said it is "very worried" by recent spike in crude prices due to unrest in Libya.

TALKS WITH UNIONS ON AUSTERITY MEASURES

The government has been involved in a dialogue with the unions and companies to reform the labour market in order to increase competitiveness, including by reducing layoff compensation and making firing and hiring easier.

Main unions have said they are concerned about the prospects of changes to the labour code, as well as more austerity.

Unions have reacted furiously to the austerity drive already in place. On Nov. 24, the 500,000-strong UGT and the 750,000-strong CGTP unions staged what they said was Portugal's largest general strike.

But since then union leaders have changed tack, organising sectorial strikes such as in public transport.

What to watch:

-- Rising social discontent among private sector workers. Unions have organised a national rally in Lisbon on March 19.

For political risks to watch in other countries, please click on [ID:nEMEARISK] (Reporting by Andrei Khalip and Shrikesh Laxmidas, Editing by Sonya Hepinstall)