Portugal goes to the polls with further austerity on horizon

Two months after the resignation of Prime Minister Jose Socrates, Portugal goes to the polls Sunday in a general election to decide manages the country’s 78-billion-euro EU-IMF bailout.

Three polls released Wednesday gave the edge to the Social Democrats, led by Pedro Passos Coelho: they put support for the party between 35.4 and 38.5 percent, against 30.1 and 31.3 percent support for the Socialists.

But nearly a quarter of all voters are still undecided.

Some have rejected the unpopular outgoing prime minister.

But others fear the PSD promise to “go beyond” what the International Monetary Fund and the European Union has demanded in exchange for the bailout in terms of privatisations and reforms.

The tiny right-wing CDS-PP party, which also backs the aims of the bailout, looks set to remain the third party, which should give the right-leaning parties a majority in the 230-seat parliament.

In recent days Passos Coelho has stepped up his attacks on the government.

If Socrates is re-elected, he warns, “within six months” Portugal could find itself in the same “tragic” situation as Greece, which needs a second bailout package.

“This government has already failed,” he argues, alleging that Socrates “lied about the real state of the country” and “led the country to bankrupcy”.

In Portugal, unlike in Greece and Ireland, all parties represented in parliament — except for the far-left — have promised to strictly respect the conditions of the three-year bailout negotiated in May.

Portugal has already received 12.6 billion (18.1 billion dollars) of the bailout, which will allow it to repay around 7.0 billion euros in debt and interest payments due in mid-June.

The new government is expected to be sworn in at the end of June or early July.

Under the terms of the bailout deal it will have to reduce Portugal’s public deficit from 9.1 percent of GDP last year, to 5.9 percent this year — and the euro zone limit of 3.0 percent in 2013.

For 2011, the bulk of the austerity measures, which include higher taxes, social spending cuts and a reduction in public sector worker’s salaries, have already been implemented by Socrates’ government.

But others are planned for 2012 and 2013 which will affect old age pensions and jobless benefits.

At the same time significant reforms are also called for to revive the recession-hit economy, which is considered to be too dependent on the state and is not competitive.

Throughout the campaign, Socrates has repeatedly said that he “fought with all his forces” to avoid resorting to foreign aid.

He argues that the bailout would not have been needed if the centre-right opposition had not rejected his government’s fourth austerity plan in just under a year, which triggered his resignation.

“They provoked this political crisis to bring in the IMF and be able to apply an ultra-liberal programme more easily,” said Socrates.

Socrates accuses the PSD of wanting to privatise the public health and education system and “destroy the social state”.

But 76-year-old Maria Cecilia da Silva, as she leaned against her window to watch a Socialist party caravan pass through her howetown of Lourinha earlier this week, said she was unsure for whom to vote.

“I don’t know which one of the two will do a better job for the country, which is in such bad shape,” she said.

“And I don’t understand why they speak so badly of each other when they all signed the same thing,” she added referring to the bailout agreement.