* Investors face a string of potential political face-offs
* Greece, Ireland, Portugal in focus so far
* Spain, Italy could attract spotlight next year
By Peter Apps, Political Risk Correspondent
LONDON, Nov 5 (Reuters) - On the Eurozone's troubled fringe, governments bluntly offer voters, MPs and oppositions a stark choice -- either back us or face early elections, political collapse and a financial market rout.
That leaves investors facing the threat of periodic
political crises across any or all of the group insultingly
dubbed the PIIGS -- Portugal, Italy, Ireland, Greece and Spain
-- that could push out bond yields and the euro
"Obviously, from a political point of view it makes sense to dare the opposition or electorate to bring you down -- and hope they won't because the alternative is too horrible," said David Lea, Western Europe analyst for Control Risks.
"But it's always going to worry investors."
Greek Prime Minister George Papandreou is making what analysts say is a risky play for support in upcoming local polls, threatening to call early general elections if voters punish ruling Socialists heavily in Nov 7 and 14 local votes.
In Ireland, the government will use every political trick in its armoury to make sure that 2011 budget sneaks through in December despite its coalition majority likely falling to just two after an upcoming by-election.
For key political risks to watch in Greece [ID:nRISKGR]
For key political risks to watch in Ireland [ID:nRISKIE]
For key political risks to watch in Portugal[ID:nRISKPT]
For key political risks to watch in Italy [ID:nRISKIT]
For key political risks to watch in Spain [ID:nRISKES]
Portugal's government cleared most of its budget hurdles winning a vote on general guidelines on Wednesday, with the centre-right opposition social democrats agreeing to abstain. But the party's parliamentary leader warned it would still scrutinise the bill carefully before a final vote on Nov 26.
All three governments hope to be able to use the threat of swift and damaging investor flight to push through tough reforms. No one, they hope, will be willing to spark a crisis that could drive a country to the brink of bankruptcy or beyond.
But some of the votes are far from foregone conclusions and markets have been spooked anyway. The worry has helped to push the spread between Irish and German bonds out to record levels. Greek-German debt spreads have also risen sharply.
Weakened, battered and unpopular as many governments are in the Eurozone's most indebted states, analysts say new elections in particular could make things worse.
RISKING A "MEDITERRANEAN BELGIUM"
"If there was an election in almost any one of those countries, I wouldn't bet on an outright opposition victory," Lea said. "You could end up with a Mediterranean Belgium -- and that wouldn't be good for anybody."
Belgium has been without a government since parliamentary elections in June, slightly unnerving investors who want to see it also rein in its budget deficit.
But it has been under much less immediate market pressure than the PIIGS.
There are clear differences between the countries. Portugal's centre-left Socialist party survived its election last year, but lost its ruling majority.
Greece's Socialists were only elected late last year, leaving them in part able to blame their predecessors for Greece's financial misfortunes and resulting need for austerity.
Ireland's ruling Fianna Fail has no such luxury. In power since 1997, opinion polls suggest it will be swept from power when elections are finally held next year.
The prospect of an orderly Irish election and transition of power leaves markets largely unfazed -- the key 2011 budget would already have passed and all three major parties are committed to deficit reduction. But a budget vote failure, government collapse and policy hiatus in the run-up to unexpectedly early polls would be a different matter.
Still, most analysts expect the government to survive -- in part because the opposition Fianna Gael might well prefer the current government to take the political hit for new austerity.
While political tensions in those three countries look set to continue to affect asset prices -- particularly government bonds -- in the coming months, some believe the real danger comes the following year.
ITALY, SPAIN NEXT?
"The politics look bad in Portugal, Greece and Ireland right now but this is mainly posturing and noise," said Ian Bremmer. "In a macro European terms, these three countries are small and containable in the event of a crisis. The two that pose systemic risk are Spain and Italy. Both are fine for now but 2011 could be very turbulent."
Spanish Prime Minister Jose Luis Rodriguez Zapatero cleared a major hurdle bypassing the 2011 budget with support from the Basque National Party, avoiding the threat of a no-confidence vote and early elections.
Tensions may rise again next year in the run-up to polls in 2012, although again some suspect the opposition would rather avoid forcing early elections and leave austerity to Zapatero.
Italy has largely avoided the kind of market pressure so far inflicted on other fringe Eurozone borrowers, and hope its austerity package will help avoid similar crises.
But that too could change particularly if a lingering stand-off between Prime Minister Silvio Berlusconi and key former ally Gianfranco Fini erupts once more, perhaps bringing early elections next year.
For now, both Italy and Spain remain under much less pressure than the PIIGS, with the spread between Italian and German 10 year bonds around 165 basis points and Spanish-German spreads 205, compared to 550 for Ireland and 900 for Greece.
But most analysts expect all to be buffeted by political stories in the year to come.
"In terms of the Eurozone, it looks like the Greek story will always be with us and the spotlight will move around the other troubled countries," said Control Risks' Lea. "Last week was Portugal, this week Ireland. Next week, who knows?"