Portuguese Communists ready to form government with Socialists

LISBON (Reuters) - The head of Portugal's Communist Party said on Wednesday it along with the Socialists and a smaller leftist party could form a majority government as an alternative to the centre-right.

Political uncertainty has enveloped Portugal since an inconclusive Oct. 4 election, with both caretaker Social Democratic prime minister Pedro Passos Coelho and Socialist leader Antonio Costa now striving to form different governments.

A protracted political stand-off could undermine a nascent economic recovery in Portugal just a year after it emerged from an international financial bailout.

"From our point of view there is another government solution that blocks the (centre-right) Social Democrats and CDS from forming a government," Communist leader Jeronimo de Sousa told reporters after meeting President Anibal Cavaco Silva.

"There is a large majority of lawmakers (ready) to form a Socialist-led government, which will allow it to present a programme and start working with lasting solutions to defend national interests, workers and the Portuguese people."

Sousa spoke after both Costa and the head of the Left Bloc, the other party that would make up a Socialist-led government, told the president on Tuesday they were ready to forge ahead with an alternative to the centre-right.

Silva must now decide who to name as prime minister and end the stalemate between Passos Coelho and Costa. The president will end consultations with political parties on Wednesday and will then make his decision.

Passos Coelho insists he should be named premier as his grouping drew the most votes in the election although falling short of a majority. But, together, the Socialists, Communists and Left Bloc would command a majority in parliament.

THREAT OF NO-CONFIDENCE VOTE

The normal practice in Portuguese politics is for the president to opt for the most voted-for candidate.

But Sousa said that if the president named Passos Coelho as the new prime minister it would be a "complete waste of time" as the Communists would then present a motion of no-confidence in a centre-right government.

A government led by Passos Coelho would have 10 days to present a programme to parliament. If it were rejected, the government would fall.

The potential formation of a leftist government has taken many in Portugal by surprise as the moderate left-wing Socialists have no tradition of working with the far left because of big policy differences.

The Left Bloc, which overtook the Communists in the Oct. 4 election, have been inspired by Greece's governing leftist Syriza party, appealing to an urban young fed up with austerity and vowing to defend wages, pensions and to fight unemployment.

The Communists have traditionally championed workers' rights and opposed both membership of NATO and the euro currency.

But both they and the Left Bloc have agreed to the Socialists' demand to stick with current EU budget rules even though they want austerity conditions to end, making a broad leftist governing coalition conceivable.

Passos Coelho's government carried out sweeping austerity measures and large tax increases during a bailout to combat a debt crisis, sending Portugal into a three-year recession.

(Editing by Andrei Khalip and Mark Heinrich)