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Portugal president seeks swift talks on premier after Socialist win

LISBON (Reuters) - Portugal’s president will consult the main political parties on Tuesday so as to have a prime minister-designate in place without delay to tackle issues such as Brexit following the Socialists’ victory in Sunday’s election, his office said.

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Despite winning more seats than in the last election, the Socialists fell just short of a full parliamentary majority and their leader Antonio Costa, prime minister for the past four years, needs to negotiate a new deal with one or both of his far-left allies in the previous legislature.

President Marcelo Rebelo de Souza, the head of state, said in a statement on Monday that he wanted a new premier to be designated swiftly “given that on Oct. 17 there is an important European Council meeting, namely about Brexit”.

In his victory speech on Monday, Costa said voters liked the 2015 deal under which the Left Bloc and the Communists backed his Socialists to sideline the right, and he wanted it to continue. He said he also intended to negotiate with the animal rights and environmentalist People-Animals-Nature party.

Leaders of the two far-left parties both said they had no objections to Costa being nominated as premier and were ready to negotiate if he committed to improving the lives of workers and boosting public investment, especially in healthcare.

Analysts say the president is likely to demand assurances from the parties that they agree an arrangement that will last.

Costa’s minority government has received praise from Brussels and at home for combining fiscal discipline with measures to promote growth after recession and the austerity of Portugal’s 2010-14 debt crisis.

Ana Andrade, an analyst at The Economist Intelligence Unit, said a political alliance on the left was likely, with Costa probably having to make some concessions on public spending. She also saw room for Costa to seek support on a case-by-case basis from the opposition PSD for some policy measures.

Still, “it is likely to be a more unstable term than in 2015, not least because of the less favourable macroeconomic backdrop”, she said. Economic growth has been slowing down, weighed by global trade tensions and concerns over Brexit.

But ratings agency DBRS Morningstar, which lifted Portugal’s credit rating last week, said the election outcome “points to broad continuity of domestic policies”. It expected an alliance similar to the one that enabled Costa’s first government.

With most votes counted, the Socialists led by a wide margin with 106 seats, 20 more than in 2015. They can still win some of the four seats yet to be assigned, but not a full majority of 116 in the 230-seat assembly.

In the streets, people were cautiously upbeat that a stable government will be possible, but many urged caution.

“Let’s see what happens from now on,” said Marcelina Castela, 65, a post office worker in Lisbon. “It would be great to have a more cohesive and consistent alliance, but on the other hand maybe it will create more bickering between them.”

Additional reporting by Catarina Demony, Victoria Waldersee; Editing by Giles Elgood