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Socialists win Portuguese election, lose majority

LISBON (Reuters) - Portuguese Socialist Prime Minister Jose Socrates won a second term in a general election on Sunday but, as expected, his centre-left party lost its absolute majority in parliament.

Portugal's Prime Minister and Socialist leader Jose Socrates gestures after exit polls showed the ruling Socialists won the Portuguese general elections in Lisbon, September 27, 2009. REUTERS/Hugo Correia

Socrates won about 37 percent of the vote, compared with 45 percent in 2005. That leaves him with the delicate task of having to opt to rule alone in a minority government, form a coalition, or negotiate in parliament on a case-by-case basis.

He kept his options open in his victory speech.

“The people voted and they spoke very clearly, the Socialist Party was chosen again to govern Portugal,” Socrates said, adding it was “too early to talk about” coalitions or pacts.

He said only after consultations with the president and other political parties in mid-October would “everybody know what the political solution will be.”

“Socrates is cool, Socrates is cool!” supporters shouted at Socialist Party headquarters.

The centre-right Social Democrats under Manuela Ferreira Leite, 68, who had campaigned for vigorous public sector spending cuts, gained around 29 percent of the vote, virtually unchanged from 2005.

Analysts said a minority government was most probable.

“They will most likely form a government on their own and at least in the first year there should be some stability, with the main opposition party obviously weakened by the election result,” said political scientist Antonio Costa Pinto.

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“The victory gives the Socialists a good result, but it is difficult to foresee if they can hold out for a full term.”

Socrates will not only have to repair the economy after its deepest recession in decades but also rectify the long-term economic weaknesses that caused it to lag behind its European partners in the past decade.

Unemployment is 9.1 percent and rising, its highest since the 1980s.

With the deficit set to reach 5.9 percent of gross domestic product this year, the budget is likely to need spending cuts or tax hikes. Such a challenge could force the Socialists to work with the Social Democrats on issues such as public finance and the 2010 budget.

During his first term, Socrates embarked on what were considered ambitious reforms, including of public pensions and the civil service. Market-friendly reforms of this kind could be difficult to repeat with a minority.

With 99 percent of votes counted his Socialists were on course to hold 96 seats in the new parliament, sharply down from 121 seats in the 230-seat parliament during his first term.

On other issues, like social reform, the Socialists may turn to left-wing parties. Socrates, like the left, sees a bigger government role in the economy, with projects to create jobs.

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The Left Bloc, one possible ally on the left for the Socialists, posted strong gains from the last election, rising to 10 percent support from 6.3 percent in 2005.

But analysts doubted any kind of formal coalition government was likely with either the left or the right.

“A coalition scenario is not impossible, but would be very difficult as left-wing parties have no incentives to ally with the Socialists, being ideologically very distant,” said Pedro Magalhaes of the Catholic University of Lisbon.

“An alliance with (right-wing) CDS-PP would cause a lot of dissatisfaction within the Socialist party.”

Socrates has advocated a series of big, vote-winning infrastructure projects, such as a high-speed train link to Spain and a new Lisbon airport to boost jobs and growth.

This year the economy is expected to contract by up to 4 percent.

Additional reporting by Sergio Goncalves, Elisabete Tavares, Vitor Moreira, Shrikesh Laxmidas; editing by Andrew Roche