The center-right President Anibal Cavaco Silva named the Socialist Antonio Costa as Portugal’s new prime minister.
In the parliamentary election in October, the center-right coalition of Prime Minister Pedro Passos Coelho remained the strongest political group, but lost its absolute majority in parliament. This was the result of the harsh reforms he pushed trough in his years in office.
In a first move, President Anibal Cavaco Silva named his fellow party member Pedro Passos Coelho head of a minority government, which lasted only a few days because the three far- and center-left parties were united in there opposition to the new cabinet and its policies. Since they control a majority in parliament, they made sure the new government would lose its mandatory vote of confidence within ten days of its formation.
President Anibal Cavaco Silva was worried about the anti-austerity program the three parties of the left proposed for Portugal. In the past, some within the Communists and the Left Bloc had even advocated Portugal’s exit of both the eurozone and Nato. All three parties had taken euroskeptic and anti-austerity positions during the electoral campaign.
Against all expectations, the three parties of the left, which hate each other, came forward with the idea of a coalition government. Their left-wing agenda proposed a reversal of the salary and pension cuts decided by the ousted government of Pedro Passos Coelho, an increase of the minimum wage from 505 to 600 euro per month, an increase of the minimum pension to 628 euro, to lower the VAT for restaurants from 23% to 13%, the reintroduction of four public holidays abolished by the previous government, a halt to privatizations (including the national airline TAP), to undo the privatizations of the Lisbon Metro and public buses, the 35-hour-week for state employees, a return to the right to abortions free of charge, subsidized electricity for poor families and more. In order to finance this spending spree, the three parties of the left proposed higher income taxes for the rich as well as the introduction of a wealth tax.
We will soon find what of this program will be implemented. Parliament will soon have to vote the 2016 budget. The new, Socialist Prime Minister Antonio Costa promised to respect Portugal’s promises made to the European Union regarding the country’s budget and public debt, which stands at roughly 127% of GDP. The unemployment rate still stands at roughly 12%. The 2015 budget deficit is expected to be around 3% of GDP, notably thanks to a growth rate of around 1.5% to 1.7% (the latter number is the Bank of Portugal prediction) in 2015.
In the end, the Socialists, the Communists and the Left Bloc decided not to form a coalition government. Instead, they agreed that the Socialists will form a minority government, which will be supported in parliament by the Communists and the Left Bloc.
It remains a mystery how the (now former) Lisbon Mayor and Socialist Prime Minster Costa will be able to reconcile his promise of an end to austerity (or rather an end to structural reforms) with the respect for the Maastricht criteria regarding the budget and the public debt.
The next test after the adoption of the 2016 budget will be the presidential election in January 2016. Portugal’s future looks unstable. The Communists and the Left Bloc control the future of the Socialist Prime Minister Costa from the outside (in parliament). The government is not free in its decisions. Will it last for a full term?
Photograph by Wikipedia user Manuelvbotelho of António Luís Santos da Costa (*1961 in Lisbon).
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Article added on November 24, 2015 at 20:03 CET
