Democrats in Portugal's pole position
Polls suggest the centre-right Social Democrats (PSD) will win the vote but not a full majority. They will have to team up with the rightist CDS-PP to form a coalition and implement the measures set by a 78 billion bailout agreed with the European Union and the International Monetary Fund last month.
Socialist Prime Minister Jose Socrates, who has been in power since 2005, appeared to be heading for a defeat last night following his resignation in March and subsequent request for a bailout which he had resisted for several months.
Socrates blamed the opposition for triggering the bailout request by blocking his party's austerity package, but voters seem to have rejected his excuses for the dire state of the economy. With the three-year bailout imposing spending cuts and tax rises, PSD leader Pedro Passos Coelho is expected to have little time to settle into the job of prime minister.
The new government will have to combat joblessness - which at 12.4 per cent is the highest on record - and rising social discontent.