PORTUGAL still learning the ropes. A young democracy charts across choppy electoral seas

The taxis tell the tale. In Madrid it was a shiny Seat sedan, speeding along clean, modern boulevards. In Lisbon, it was a relic from the 1960s with muffler problems, coughing its way up and down narrow, crumbling streets, with full laundry lines flapping overhead and shacks bunched along the sidewalks.

``I'll get you there,'' the cheerful Portuguese driver promised. ``I'll fix the car soon, too.''

Just like the ancient taxi, Portugal stumbles along. Occupying the westernmost edge of Europe, it is by far the poorest country in Western Europe. Average income levels are half those in Spain.

And if Spain's European credentials still draw doubts, Portugal's dilemma is much more pointed. Many ask: Has Lisbon become the only third world capital in Europe?

Politically, at least for now, the answer is no. Since an Army coup ended the dictatorship 10 years ago, the country has lurched from a near-communist takeover steadily to the right, moving through 15 governments to the current center-left coalition run by Socialist Prime Minister Mario Soares.

Full Western freedoms are enjoyed, and in two years in power, Mr. Soares has instituted a tough austerity program, suggesting the democratic system has stabilized somewhat.

Economically, though, conditions are deteriorating. An estimated hundred thousand workers have not received their paychecks for months, but because there is no other work, they remain on the job. The shantytowns outside the major cities are growing -- and hunger has become a national problem.

``The poverty has multiplied and worsened in the last year or so,'' says Jos'e Mendes Serrazina, director of the Catholic charity Caritas Portuguesa. ``We've always been poor, but before we always at least had enough to eat.''

Why the crisis? Why does Portugal remain so much poorer, so different from Spain? Look at a map, and much of the answer becomes clear.

Portugal sits like a quay on the Atlantic. Isolated from the rest of Europe by Spain's bulk, the Portuguese have always searched out their fortunes in that rough sea.

Inland, Portugal's frontiers have not changed much since the 14th century, when King Joao won an epic battle against the Spanish.

But the coast has known no limits. In the 15th century, the Portuguese were the first white men to reach China and Japan. Vasco de Gama discovered the route to India: Its spices made Lisbon Europe's richest and most beautiful city of the day.

If the sea brought fantastic wealth, though, it also brought dangerous illusions. Portugal lost India to the British. Brazil was in turn lost to independence. And Brazil was replaced by the African colonies of Angola and Mozambique. Meanwhile, the Portuguese kings fought a series of debilitating wars. The country wasted into a political and economic morass.

In 1926, the Army installed economics professor Ant'onio de Olivieria Salazar in power. He ruled until 1970, establishing order through totalitarianism. But he did not try to modernize the country.

``Salazar wanted to keep a rural, traditional society, and he did it by creating an artificial economy with the colonies,'' says Jaime Nogueira Pinto, a professor at Lisbon's Institute of Political Science. While General Franco gradually opened up Spain to Europe, Salazar plundered Africa's rich supply of cheap raw materials and used its markets to unload products that were uncompetitive elsewhere.

That artificial economy, never strong, began crumbling when independence movements broke out during the mid-1960s in both Angola and Mozambique. Salazar and his successor, Marcelo Caetaeno, kept fighting, squandering the country's resources in wars Portugal was too weak to win, but too strong to lose.

By 1974, the Army could take no more. On April 25, a group of left-wing captains led by Gen. Ant'onio de Spin'ola engineered a coup. In September, the left-wingers deposed Spin'ola, who was hesitating to pull out of Africa, and quickly gave the colonies independence. Nearly a million refugees from Angola and Mozambique soon were converging on Lisbon.

With close cooperation from the Communist Party, the left-wingers on the revolutionary council moved to erase the dictatorship's domestic legacy. Most industry was nationalized. Holdings of large landowners were turned into cooperatives.

Since then, the political pendulum has taken the traditional revolutionary swing back to the center, and a working democracy has been established. In November 1975, moderate military men ended the radicals' grip over the armed forces. The following year a constitution was drafted and elections held. Mr. Soares's Socialists won parliamentary control, and Gen. Ant'onio Ramalho Eanes, a leader of the coun-tercoup, the presidency.

Civilian powers were reinforced in 1980 with the revision of the Constitution, and in 1982 with the passage of a new national defense law. The new Constitution abolished the Army-dominated revolutionary council. The new defense law aims to trim the oversized Army, which was designed to fight colonial wars, into a compact and modern force of 50,000 men capable of reinforcing NATO's southern flank.

So is Portugal, as government advisers proclaim, ``a democracy like all others in Western Europe''? It does boast, as these advisers proclaim, freedom of speech, a free press, free trade unions, and free political parties participating in free elections. All are considerable achievements to have been accomplished in 10 years.

But the system remains immature. One destabilizing factor is terrorism. Police accuse a group called the Popular Forces of the 25th of April (FP-25) of a series of bank robberies, bombings, and assassinations since 1980.

The group's possible ties to radical elements in the Army make it even more threatening. Some 42 FP-25 suspects were recently arrested: among them, Lt. Col. Otelo Saraiva de Carvalho, hero of the 1974 coup. Nonetheless, Otelo's Army followers continue to meet under the auspices of a ``social group.''

``It's a dangerous development,'' Justice Minister Rui Machete said. ``The military and the Communist Party may be sponsoring terrorism.''

What may give the troublemakers a potential opening, according to Mr. Machette and other analysts, is a blurry constitutional division of powers. In Portugal, the prime minister leads the government, formulating policies. But the presidency is much more than a ceremonial post. The president is commander in chief of the Army and has veto power over all legislation.

This uncomfortable arrangement has been made even more uncomfortable by the feud between Prime Minister Soares and President Eanes. The two are sworn political enemies. Mr. Soares governs looking over his shoulder, while Mr. Eanes, a respected figure, places himself above party politics as the final arbiter of national needs.

A presidential election is scheduled for next year. By law, Eanes cannot run for reelection, and his future has become a major topic of conversation. Some fear he might imitate Napoleon and play strong-man savior. More likely, he will form a separate political party challenging the center-left terrain of the Socialists and the Social Democrats. Public rallies for such a party were held this January.

In any case, the instability will continue until either the president and prime minister come from the same party or the Constitution is revised to give one position clear preference over the other.

``We're still completing our political transition,'' says Socialist member of Parliament Rudolph Crespo, ``and the institutions have to solidify.'' -- 30 -- {et