Adeus austeridade? Portugal after the fall of its centre-right government

Published on 12. November 2015 by Armanda Cetrulo

Political crisis On the 10th of November, after a very tense day in Parliament, Portugal’s centre-right government headed by Prime Minister Coelho was brought down by the socialists and radical left parties (123 to 107 votes) after only twelve days, thus entering the Guinness Book of Records as the shortest-lived government in the history of Portugal. Portugal’s political uncertainty started after the national election of 4 October, which had produced unexpected results and with 55.8% the lowest turnover ever The centre-right coalition Portugal Ahead formed by the Social Democratic Party (PSD) and the CDS People’s Party (CSD-PPP) gained 36.8% of the votes, losing more than 20 seats in the Parliament. The Socialist Party on the other hand increased its number of seats, reaching a total of 85. Even more interestingly, the radical left parties obtained an important result with 19 seats going to the Left Bloc (B.E.) (10,2% of votes) and 17 seats to the coalition of Communist Party (PCP) and Greens (PEV). Together the left-wing parties occupy the majority of seats in the Parliament, outnumbering the total amount of seats of the centre-right coalition even though the latter acquired more votes. After the election, Antonio Costa, leader of the Socialist Party, proposed to form a socialist leftist government, but on 22 October, the President of the Republic, Aníbal Cavaco Silva (a former President of the Social Democratic Party), strongly rejected this option and nominated Pedro Passos Coelho as the new Prime Minister. In his speech President Calvaco Silva replayed many of the arguments which have been used all over Europe whenever new and radical parties gained attention and popular support as before in Greece and Spain. He cited the example of the 2009 elections when the Socialist Party took the power because it gained the most votes even though it did not obtain the majority of the seats. On the other hand, he focused explicitly on Europe, stressing the duty of Portugal to respect its obligations, guarantee its credibility and enhances its external trustworthiness to ‘financial institutions, investors and markets’. He assessed the rise of anti European political parties, which ask for the exit from the euro and from NATO, as a threat for national stability and economic recovery. Stating that ‘this is the worst moment to radically change the basis of our democratic regime’, he asked for support of his new government. However, on 10 November Prime Minister Coelho failed to get the majority in the Parliament as was already expected, considering the previous election of the socialist Ferro Rodrigues as President of the Assembly to the Republic.

Economic crisis Portugal is one of the southern countries which have been most severely hit by the crisis, even though contagion and speculation played a crucial role worsening economic fundamentals such as the percentage of debt over GDP that in fact was relatively low in 2008. After the bailout of the two main banks Banco Português de Negócios and Banco Privado Português, the downgrading of na-tional debt rating by Moody’s and the pressure of international financial markets, in May 2011 then prime minister Socrates (Socialist Party) signed the Economic Adjustment Programme for Portugal (bailout programme). The bailout package consisted of €78 billion equally financed by the TROIKA and was implemented after the Greek and the Irish programmes. Obviously, it contained the obligation for the country to cut budget spending, freeze wages and implement austerity measures. Then, with the election in 2011, centre-right prime minister Coelho, continued to implement these policies exacerbating the hardship. The effects on economic and social conditions have been extremely negative: even though the GDP has started to grow again, the ratio of the debt over GDP has increased considerably, social services have been cut and unemployment has risen as we can see from the following figures.

Time to change The huge increase in votes for the radical left reflects people’s discontent with the lack of a strong opposition to austerity and the need for a radical change from the course of the centre- right coalition. In this sense, the Socialist Party and its leader Costa (Lisbon’s former mayor), seems to have understood the risk of losing a wide popular political support. Instead of emulating right wing parties with a TINA approach to austerity, they have shown their willingness for dialogue and cooperation with the radical left by signing similar agreements with both Communists and the Left Bloc. The latter comprises among other measures restoring wages and unfreezing pensions, fight against precarity, 13% tax cuts for restaurants, wider fiscal stimuli regarding in SMEs’ corporate tax, enhancing the public health care system, boosting student support and refusal of any new privatisation processes.

We have asked Joao Carmago, an activist of Precários Inflexíveis for a brief comment on this programme and his assessment turned out to be positive: ‘We think that it is a good starting point to end the vicious circle of precarisation the last government stood for; the programme stresses important issues that we raised during the campaign and it included much of our 47 point plan to combat precarity and unemployment, namely the issues of fake autonomous workers and fake internship, as well as the need to strengthen labour inspection and restrict short-term contracts.’ At the same time, he warned the future government: “We’ll be on top of the issue to see that the measures approved are in line with our demands and we’ll also push for other measures we had demanded, namely regarding temporary job agencies”. The recent events in Portugal had at least two important effects. First of all, socialists and leftists have been able to disclose and dismantle the anti democratic and authoritarian rhetoric adopted by the centre-right parties according to which it was essential to ensure, above all, ‘trust and credibility’ on the part of the European institutions and the financial markets, at the same time neglecting the importance of support by the people and underestimating the outcome of the democratic vote Secondly, the current events have shown, at least until now, that it is possible to bring about a radical change and to build a coalition based on the refusal of austerity and on the adoption of expansive and redistributive economic policies. There are some resemblances with the Greek case, but also many differences, since Portugal does no longer depend on a bailout programme and the possible future government is considered ‘less radical’ than the Greek one. However, the road for Costa, the Left Bloc and the Communist Party will not be easy. They must be able to find a balance between a blind or over- optimistic defense of the European Union as is currently the case, and the radical and inflexible proposal of an exit. Most of all, they must respect and listen to the people’s demand for economic recovery and social justice. The contradictions that will very probably emerge, will not only be a Portuguese issue, they will clearly touch on the entire European question. Will the new coalition be able to find a consistent synthesis and turn it into a fundament for a stable and long term government? Will they be allowed to respect budget constraints and at the same time promote expansive policies, such as raising wages and pensions as they have announced? Right now, we could choose for an optimistic, pessimistic or evasive answer. Whatever the case may be, as Europeans, we should watch very closely what will happen in Portugal in the following days.