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Portugal keeps Socialists in power despite slump

With unemployment at its highest level in 20 years, Portugal went to the polls yesterday in an election that could bring greater political uncertainty as the ruling Socialists are expected to win but fall short of an absolute majority.

Prime Minister Jose Socrates, an energetic 52-year-old, is expected to win around 38 per cent of the vote, according to the last polls. That result would leave him short of his current majority and he would likely have to rule with a minority.

The highest jobless rate since the 1980s and the worst economic downturn in decades has not been enough to push the Portuguese away from the centre-left Socialists, who launched market reforms and cleaned up public finances in their first term. Manuela Ferreira Leite, 68, the leader of the centre-right Social Democrats, has fared poorly, analysts said.

She is known as a tough cost cutter from a stint as finance minister when current European Commission President Jose Manuel Barroso was prime minister of Portugal. Analysts said that a minority government would not be a disaster, but could reduce Mr Socrates's ability to make ambitious reforms. He won 45 per cent of the vote in 2005, giving him a strong absolute majority in parliament that allowed him to clean up public finances and to reform pensions and the civil service.

This time around, he might have to co-operate with Ms Ferreira Leite's party, particularly on public finance and the 2010 budget. On other matters, such as social reform, the Socialists may turn to leftist parties. Mr Socrates, like the left, sees a bigger government role in the economy, with projects to create jobs. This year, the Portuguese economy is expected to contract up to 4 per cent in what is western Europe's poorest country.