Your weekly briefing on the state of 
Our world this week
Donald Trump the Democrat
Is the bitcoin bubble about to burst?
Israel’s house of cards
Italy: the last litmus test for European populism?
Trump in Moscow: what happened at Miss Universe in 2013
The smuggler and the refugee: Bullets, beatings and babies crying
The world's least likely Girl Guides

Portugal’s general election paves the way for political instability

Portuguese Politics
See 7 more
Portuguese Prime Minister Pedro Passos Coelho gestures to supporters following the announcement of the results of Portugal's general elections on Sunday, Oct. 4, 2015, in Lisbon
AP Photo/Armando Franca
Portuguese Prime Minister Pedro Passos Coelho gestures to supporters following the announcement of the results of Portugal's general elections on Sunday, Oct. 4, 2015, in Lisbon
Portugal’s governing centre-right coalition was re-elected on October 4, but lost its majority. A period of political uncertainty and instability is likely to follow.
P ortugal faces a period of political uncertainty and potential instability after the centre-right coalition that steered the country through a painful bailout emerged from Sunday’s general election as the largest political force but lost its outright majority.
Pedro Passos Coelho, the prime minister whose Forward Portugal (PAF) alliance won 38.3 per cent of the vote, says he is ready to make concessions on austerity as part of a potential deal with the opposition Socialists (PS) to prop up a minority centre-right government.
But after four years in which his fiscally hawkish administration was supported by an absolute majority, the prime minister will now have to contend with a parliament in which left of centre parties, although deeply divided among themselves, command a majority of seats.
“In contrast to the relative stability that has characterised Portugal in recent years, the political backdrop is set to deteriorate,” said Antonio Barroso, an analyst with Teneo Intelligence, a risk consultancy. “While the government might be able to get its first budget passed in parliament, stability could become a challenge very soon.”
No minority government has survived a full term in Portugal since the overthrow of its fascist dictatorship in the 1974 Carnation Revolution.
The election had created an “impasse”, the Público newspaper said in an editorial on Monday. The government alliance had lost “hundreds of thousands of votes” and had little latitude to implement its programme “even if by a miracle it succeeds in getting it through parliament”.
On Tuesday, Aníbal Cavaco Silva, Portugal’s conservative president, invited Mr. Passos Coelho to sound out the position of other parties and to form a government “that assures political stability and the governability of the country”.
The ruling coalition saw its share of vote drop by about 12 percentage points from just over 50 per cent in the previous election in 2011. It will control 104 seats in 230-seat parliament compared with 136 previously.
Mr Passos Coelho told cheering supporters that although it failed to win a second absolute majority, his coalition had emerged the clear victor, despite having led the country through “a period of national emergency in which every citizen was called on to make deep sacrifices”.
Antonio Costa, leader of the pro-euro PS, the main opposition party, faces potential challenges to his leadership after failing to mobilise voter resentment over government austerity measures. The PS increased its share of the vote to 32.4 per cent, from 28 per cent previously, to win 85 seats, up from 74.
Before you skin a rabbit, you have to catch it,” Mr. Passos Coelho cautioned his rivals in September. Coelho means rabbit in Portuguese.
Mr Costa, who only a few months ago had been expected to sweep to victory on a tide of public anger towards the government, said he had no plans to quit. But critics in the party have already made clear they are likely to seek a new leader.
António Galamba, a member of the PS national committee, said in a statement it was difficult to understand how the Socialists could lose this election. Mr Costa had “failed disastrously in presenting the PS as an alternative” to the centre-right.
Portugal’s election result illustrates a wider problem for Europe’s centre-left. Despite capitalism’s gravest crisis in almost 80 years, voters by and large prefer centre-right parties to try and set things straight.”
Tony Barber , Europe editor at the Financial Times.
To the left of the PS, the Left Bloc (BE), a radical anti-establishment forerunner to Greece’s Syriza founded in 1999, more than doubled its share of the vote to 10.2 per cent, electing 19 deputies and overtaking the hardline Communists to become the third largest political force. The Communists won 17 seats with 8.3 per cent of the vote.
Mr Costa rejected the idea of joining what he called a “negative majority” of the left to vote down the programme of a minority centre-right government, saying no viable alternative could be formed within the left-of-centre majority in parliament.
Instead, he set out “red lines” for government policy that Mr Passos Coelho would have to accept in return for PS support for its programme. He identified some of these as easing austerity, protecting the welfare state and more public investment in science.
The prime minister said he was prepared to reach a compromise with the PS as a moderate pro-European party that did not share the radical anti-euro sentiments of other leftwing parties in parliament.
He said his government planned to reduce income tax, restore public sector wages to pre-bailout levels and strengthen the welfare state, issues analysts said could form the basis for an understanding with the PS.
However, the prime minister said his government would not relax its goal of bringing the budget deficit below 3 per cent of national output this year, the minimum level required under eurozone rules.
The most urgent priority, he said, was to approve the government budget for 2016.
Even if the PS agrees to support the new government’s programme and 2016 budget proposals, analysts said Mr Costa or a new PS leader could subsequently seek to assert their authority by refusing to back Mr Passos Coelho’s budget plans for 2017.
Many analysts saw the result as a vote in favour of Portugal’s incipient though fragile economic recovery. Its economy shrank by more than 6% between 2011 and 2013. In July 2013, Mr. Passos Coelho’s government almost collapsed and the yield on 10-year government bonds soared to over 8%. The economy then grew by 0.9% in 2014 and unemployment has been falling for two-and-a-half years. Mr. Passos Coelho and German Minister of Finance Wolfgang Schäuble have pointed to this as evidence that austerity was necessary and has stopped Portugal’s sovereign debt crisis from becoming as dangerous as Greece’s. Opinion polls suggest voters still blame Portugal’s sovereign debt crisis on overspending by the 2005-11 PS administration.
Peter Wise
Financial Times
08 October 2015 - last edited 08 October 2015