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European crisis erodes support for governments

By Barry Hatton

Associated Press

Published: Monday, Jan. 24 2011 10:06 a.m. MST

Manuel Alegre, the Portuguese Socialist Party presidential candidate, takes an elevator after delivering a speech conceding defeat in Portugal's presidential election Sunday, Jan. 23 2011 in Lisbon. Conservative President Anibal Cavaco Silva was re-elected for a second term.

Joao Henriques, Associated Press

LISBON, Portugal — Political trouble that shook the Irish and Portuguese governments over the weekend could be a warning sign for other European governments facing voters angry about cutbacks, analysts said Monday.

The turmoil may make it harder for countries to move forward with recovery from the crisis.

"Markets want to see a clear commitment to fiscal tightening, and any political instability or social opposition can delay measures being implemented," said Emilie Gay, an analyst at Capital Economics in London.

She said investors are nervous about political uncertainty in debt-stressed eurozone countries, including Belgium — where political squabbling has left the country without a government for the past seven months.

After months of strikes over unpopular austerity measures, the governing Socialist Party's candidate in Portugal's presidential election lost heavily Sunday, collecting just 20 percent of the vote behind 53 percent for an incumbent backed by the main opposition Social Democratic Party. Both parties remain committed to budget cutbacks despite public dissatisfaction.

Ireland's prime minister, who is blamed for his country's slide toward bankruptcy after a construction bubble burst, suffered a major setback when the Green Party withdrew from his coalition government. The Sunday pullout is almost certain to move up the date of a national election, and Ireland must now pass a critical tax-raising bill before parliament is dissolved this month in order to reassure international investors that Ireland is serious tackling its deficit.

The setbacks in Portugal and Ireland likely herald more protest votes against European governments as austerity plans begin to bite and stretch over years of financial readjustment, said Vanessa Rossi, a senior research fellow at Chatham House, a London-based think tank. Portugal and Ireland have been forced to adopt austerity measures including pay cuts, tax hikes and reduced welfare entitlements.

"It's very obvious we're going to get a lot of backlash against governments because of what's happened," Rossi said in a telephone interview Monday. "I think this build-up of anti-austerity votes will continue."

Attention is turning to upcoming state elections in Germany, Europe's paymaster, where the troubled coalition government may need to stump up more rescue money to protect the 17-nation euro currency.

Seven of the country's 16 states hold elections this year, providing a series of tests from February through September.

Polls suggest that Chancellor Angela Merkel's center-right coalition can expect a rough ride due largely to local issues, annoyance with the government about unpopular decisions such as extending the life of nuclear power stations, and the unpopularity of the junior coalition partner, the Free Democrats.

Still, her government will be eager to avoid annoying voters uneasy about sinking billions more into rescue packages without securing tangible reform in return.

In addition, Germany's highest court is expected to consider in coming months complaints filed against the bailout of Greece, and creation of a euro rescue fund.

"Merkel faces pressure on two sides — from the population, which views with little sympathy what from my point of view is to some extent inevitable, because something has to be done to save the euro ... and also from potential decisions by the Federal Constitutional Court," said Gerd Langguth, a politics professor at the University of Bonn.

France, another other major European power, doesn't face presidential and legislative elections until next year. But President Nicolas Sarkozy is already treading carefully as 61 percent of French have a negative opinion of him, according to a survey by polling agency BVA.

The most acute political problems are likely to emerge in the bloc's financially weakest members.

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