Portugal's Ruling Coalition Heads for Election Victory

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People vote at a polling station in Lisbon, Portugal during the general election October 4. Rafael Marchante/Reuters

LISBON (Reuters) - Portugal's center-right government headed for victory in a election on Sunday after launching tough austerity measures to combat a debt crisis, but exit polls showed it could lose its majority in parliament.

The government coalition was projected to win between 36.4 percent and 43 percent of the vote while the opposition center-left Socialists were set to get 29.5 percent to 35 percent.

The range of projections put the highest possible number of seats the government could win at 118 seats in the 230-seat parliament but other tallies pointed to an amount lower than the 116 needed for an outright majority.

A minority government could pose a big challenge for the Iberian country of 10 million, where not a single minority administration has survived a full term since the country returned to democracy in 1974.

"In the name of the coalition we are here to affirm that all the projections that are known point to a clear fact that the coalition Portugal Forward had a great victory on this election night," Marco Antonio Costa, deputy president of the main coalition party, the Social Democrats, told cheering supporters.

Prime Minister Pedro Passos Coelho's ruling coalition has imposed tax hikes and spending cuts but argued during the campaign that the country is beginning to see the fruit of the measures with a gradual recovery after three years of recession.

The election is one of several this year to test European voters' readiness to pursue austerity plans intended to restore public finances after sovereign debt crises. Greek voters last month reelected Prime Minister Alexis Tsipras even after he swallowed the stringent bail-out terms he once rejected, and Spanish voters go to the polls in December.

Victory for the government was unthinkable just a few months ago, when all polls gave a solid lead to the opposition center-left Socialists, who have promised to ease back on austerity and give more disposable income back to families.

The general election was the first since Portugal exited an international bailout last year.

In the last election in 2011, the two ruling parties together won 50.3 percent of the vote, securing them a stable majority government. The Socialists won 28 percent back then.

Partial results will start to trickle in during the coming hours but it may be some time before it is clear whether the government has obtained a majority.

Duarte Cordeiro, head of Socialist leader Antonio Costa's campaign, said that if the projections are confirmed, it would leave the Socialists short of their goal of forming a government themselves.

"If these results are confirmed, we believe that there is no parliamentary majority for any of the candidates in these elections," Cordeiro said.

The formation of the government will then depend on President Anibal Cavaco Silva, whose duty it is to name the next prime minister. However the constitution does not specify how the president picks the winner, whether by the number of votes or the number of lawmakers elected to parliament.

"I'm confident in the job I've done.... It's a day of hope because the next four years will be very different from the past four," a composed Passos Coelho told reporters after voting on the outskirts of Lisbon, urging people to leave their homes to vote despite poor weather.

Portugal's economy returned to timid growth last year after a three-year recession and growth is now accelerating.

Going into the election, investors were broadly confident that Lisbon would pursue its reforms. Portuguese bond yields held just above seven-week lows on Friday.