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Leftist party says Portugal next target if Greece exits euro

By Sergio Goncalves

LISBON (Reuters) - Portugal's debt will be the next target of speculators if European countries push Greece out of the euro with their demands for more austerity, the leader of Portugal's Left Bloc party said.

Catarina Martins also predicted the collapse of the euro if Greece exits.

"If one country exits the euro, others can leave. The speculation will be super strong and Portugal will be the weakest country, extraordinarily vulnerable to speculative pressure from which it cannot defend itself," she told Reuters.

Left Bloc is the sister party of Greece's new ruling left-wing Syriza, but its support is far weaker in Portugal, where politics remains dominated by the center-left Socialists and center-right Social Democrats.

"The euro will be doomed from the moment the first country leaves. Keeping everything as is condemns the euro because austerity is not the way to balance accounts and pay debts," she said, adding that austerity only increased inequality between Europe's wealthy core and its southern periphery.

She said that Portugal combines huge sovereign foreign debt in private hands with large corporate debt and a weak trade balance, ageing population, low birth rates and high emigration among young people, which leaves it "next in the firing line".

The government insists that Portugal is no longer in such danger if it keeps reducing its deficit and debt, and says that years of austerity have paid off with the economy growing again.

German Finance Minister Wolfgang Schaeuble said on Wednesday Portugal is "the best evidence that adjustment programs work".

Martins said that despite its austerity, Portugal's debt increased in absolute terms while GDP fell, meaning the debt burden is unsustainable, which she said "is the consensus among those economists that do not defend the government".

She shared political analysts' view that the main opposition Socialists, who lead in opinion polls before general elections in September or October, will likely continue the general line of the current center-right government.

"The Socialist Party will not be part of an alternative solution...because it is not prepared to face the level of confrontation that is required in Europe today."

Nevertheless, she said the Left Bloc will work for a compromise with a government to reach some form of a debt renegotiation and to "liberate the country form impossible commitments like for deficit, debt and budget cuts".

(Writing By Andrei Khalip; Editing by Angus MacSwan)