Portugal “Turns the Page on Austerity”

November 25th saw Portugal’s new Socialist Prime Minister António Costa take office promising to “turn the page on austerity” after one and a half months of constitutional crisis which saw the collapse of the shortest administration in Portuguese history.

Now Costa, the son of a Communist poet from Goa, and his Socialist Party must hold together his fragile minority government with support from his radical Left Bloc, Green Party and Communist partners if he is to make good on his vow to end the savage cuts and sweeping privatisations of the outgoing centre-right government.

António Costa of the Socialist Party

 In the inconclusive general election on October 4^th had seen the ruling coalition Portugal à Frente (PaF), consisting of the centre-right Social Democratic Party (Partido Social Democrata or PSD) and their junior coalition partners the conservative CDS – People's Party (Centro Democrático e Social – Partido Popular, CDS–PP) lose the overall majority they had enjoyed since 2011, despite winning the most seats. 

With no outright winner, President Aníbal António Cavaco Silva precipitated what some termed a constitutional crisis by inviting PSD leader Pedro Passos Coelho to form a minority government despite failing to find support from other parties stating,

“In 40 years of democracy, no government in Portugal has ever depended on the support of anti-European forces.”

With these words, Cavaco Silva, who lead Portugal into the European Union as Prime Minister in 1986, refused to allow a broad coalition of left-wing parties lead by the Costa’s centre-left Socialist Party (Partido Socialista, PS) the opportunity to form a majority government on the grounds that the Communists (Partido Comunista Português, PCP) and Left Bloc (Bloco de Esquerda, BE) had campaigned to take the country out of the Euro.

Passos Coelho (left) meets Cavaco Silva in the Presidential Palace

However, the controversial move backfired when the parliamentary deputies from the leftist parties passed a vote of no confidence in Passos Coelho’s government shortly after they took office, giving them the unwelcome record of the shortest administration in Portuguese history at eleven days.

Now the real work begins for Costa, a former lawyer and popular mayor of Lisbon who has impressed many political commentators with his skillful handling of negotiations to reach an agreement with the far left parties. Costa’s Socialist Party has formed a minority government relying on the support of the more radical parties. Despite his anti-austerity agenda, Costa has allayed the fears of more conservative voters by ruling out leaving the Euro or restructuring Portugal’s debt, however he must cut the deficit to keep to European Union budget rules. At the same time, the Socialist Party has promised a Keynesian programme to increase families' disposable incomes and help the poor, while maintaining a commitment to his Left Bloc and Communist allies to raise the minimum wage, lift a freeze on pensions and cancel pay cuts for civil servants.

Since 2011, Portugal has suffered under the austerity measures required by the terms of its bailout by the Troika of the European Central Bank, International Monetary Fund and European Commission. The bailout programme, or Economic Adjustment Programme for Portugal as it is officially called, expired in November last year. Since the implementation of austerity measures starting in in 2011, unemployment has climbed to 14% (30% for young people) while wages and pensions have been slashed (sometimes illegally) in a country with one of the EU’s highest levels of income inequality and where 18% of the population live below the poverty line. With many predicting the rapid collapse of his leftist coalition, it remains to be seen if Costa can inspire the return of some of the estimated 60,000 people (including 1 in 10 graduates) who have been leaving each year in search of better opportunities.