Portugal election race swings on government poll lead

LISBON (Reuters) - Portugal's ruling centre-right coalition took a decisive lead over the centre-left Socialists in a poll published on Wednesday, marking the first clear trend change in an election race that has been stuck in a dead heat for many months.

The poll suggests for the first time that the centre-right coalition could return to power in an Oct. 4 election focussed on how to consolidate Portugal's success at leaving a debt crisis and financial bailout behind and return to growth.

All previous polls so far have shown the two sides stuck within the margin of error.

Portugal has been called a European poster child at reform and austerity under the bailout which it exited last year, sharply contrasting it with Greece, which not long ago some analysts feared it would join in an economic abyss.

Portugal's debt levels are still some of the highest in Europe.

The poll put the two parties in government, the Social Democrats and junior partner the CDS-PP, at a combined 38.9 percent, up from 37.8 percent in July.

The Socialists slid to 33.3 percent from 38 percent, suggesting its promises of easing up on austerity and boosting voter's disposable incomes was not working.

The poll will be welcome news to Prime Minister Pedro Passos Coelho, who if re-elected, would break the trends seen in Spain and Greece where governments that have enacted harsh austerity have been punished.

"On the face of it, this is quite remarkable," said Nicholas Spiro, managing director at Spiro Sovereign Strategy in London, pointing to the government's lead in the poll.

The poll was released on the same day that Passos Coelho and Socialist leader Antonio Costa, the former mayor of Lisbon, hold their only televised debate in the campaign.

Passos Coelho's government introduced the sharpest tax hikes in living memory and introduced sweeping economic reforms under the bailout, setting the stage for the country to return to growth in 2014 after three years of recession.

The recovery has accelerated this year, when growth should reach 1.6 percent, and consumer confidence has reached its highest level since 2001.

In its campaign, the government has hammered the point that with it in charge there will be no return to financial crisis and instability. Portugal was forced to seek the bailout in 2011 after the previous minority Socialist government failed to pass economic policies in parliament, which led to its collapse.

Antonio Costa Pinto, political analyst at the University of Lisbon, said the rise in the poll for the government was based on fear of instability and the economic recovery.

"There is a part of the electorate that may vote for the government as it fears that the Socialists will not obtain a majority (in parliament) and that would lead to political instability," said Costa Pinto. "That's why the coalition is sending out a message of security, continuity and stability."

Still, Costa Pinto said it was important to monitor polls in coming weeks as they could still change, adding that Wednesday evening's debate will be key.

President Anibal Cavaco Silva has urged politicians to ensure the next government has a parliamentary majority, saying that due to Portugal's economic challenges it is one of the European nations most in need of stability.

The Aximage poll surveyed 602 people from Sept. 4 to 7 and had a margin of error of 4 percentage points. It was published in daily Jornal de Negocios.

(Additional reporting by Shrikesh Laxmidas; Editing by Alison Williams and Hugh Lawson)