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Portugal govt keeps austerity, despite elections

Barry Hatton, Associated Press

LISBON, Portugal (AP) -- Portugal's government says it won't stop its unpopular austerity measures, even if it's a big loser in Sunday's municipal elections.

The election of mayors and councilors is the first nationwide ballot since the center-right coalition took office two years ago, weeks after a 78 billion euros ($105 billion) bailout.

The voting has no direct bearing on the government, but the ballot is expected to reflect the public mood.

The outcome could also have consequences for efforts by the 17 nations that share the euro currency to end their bloc's protracted financial crisis. Any political uncertainty in Portugal could fuel investor jitters about the eurozone's commitment to restoring fiscal health amid growing fears the ailing country may need a second bailout next year.

Portugal is locked into a program of tax hikes and spending cuts in return for the bailout. But the measures have brought hardship, and the jobless rate stands at 16.5 percent. A third straight year of recession is expected in 2013, after a 3.2 percent contraction last year that was the country's worst economic performance in almost 40 years.

Opinion polls have indicated government-backed mayors in some cities could lose their jobs, but Prime Minister Pedro Passos Coelho says he won't budge from his economic reform program whatever the outcome.

"No political instability will come from these elections," Passos Coelho told a recent rally of his Social Democratic Party, which governs with the smaller Popular Party.

The center-left Socialist Party, the main opposition party, is hoping voters turn their back on the government, with Socialist leader Antonio Jose Seguro calling for a gesture of "indignation" at the ballot box.

But the Socialists were in power for six years before Portugal needed the bailout and co-signed the terms of the bailout with their rivals. That has undermined the Socialist Party's authority.

A significant increase in the number of independent candidates — to 80, from 54 in the last municipal elections — was seen as evidence of growing public disaffection with the main parties.

Maria Ribeiro, a 48-year-old office worker voting in the Lisbon suburbs, said it was hard to decide who to vote for.

"I don't want to give my support the politicians who got us into this mess," she said, "but I don't know whether the independents will have the strength or the experience to change anything."

The bailout program has been the election's main battleground, even though the municipal elections normally address local issues.

The prime minister insists the recession has bottomed out. He points to second quarter growth of 1.1 percent this year and a slight drop in the unemployment rate.

The bailout creditors — the country's fellow euro members, the European Central Bank and the International Monetary Fund — are holding Portugal to its promises of reform. European leaders fear that any complacency could spin the country's public finances out of control and force the Portuguese, like Greece, to ask for more financial help when the current program ends in the middle of next year.

The government has to lop another 3.6 billion euros ($4.9 billion) off the state budget next year, when the retirement age will increase to 66 from 65.

Some 9.5 million voters were electing representatives on 308 municipal councils and more than 3,000 parish councils.