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Portugal president reappoints centre-right PM

Portugal’s president on Thursday reappointed outgoing Prime Minister Pedro Passos Coelho and tasked him with forming a new centre-right coalition, despite the lack of a majority in parliament.

But experts warned that administration may be short-lived, with a leftist alliance saying it was in position to form a government — a prospect which neighbouring Spain and Germany both expressed deep concern about.

“I have designated Mr Passos Coelho as prime minister because he is the head of the coalition which won the October 4 parliamentary elections,” conservative President Anibal Cavaco Silva said in a televised address.

Coelho’s coalition took more than 38 percent of votes in the election, despite overseeing four years of painful austerity in the bailed-out country, but it lost its absolute parliamentary majority.

Trailing in second place was the Socialist Party, whose leader Antonio Costa had also staked a claim to become prime minister, insisting he could form a government with support from anti-liberal leftist parties.

Costa said Tuesday that he was in a position to put together a government with majority support in parliament.

The Socialist Party, the Left Bloc — which is allied with Greece’s anti-austerity Syriza party — and the Communists won 122 of the parliament’s 230 seats, compared with 107 for the right-wing coalition.

If these three parties, along with the Greens, manage to formalise a parliamentary union — something which is close to happening, according to the Portuguese media — then the days of a centre-right government are already numbered.

The president’s decision to turn first to Coelho “will cost the country a lot of time because the person who has been named prime minister will inevitably by overturned by parliament,” said socialist deputy Joao Soares.

Cavaco Silva recognised that “the last word is now with parliament,” adding that a rejection of the government’s programme by an absolute majority of lawmakers would force the new government to step down.

– ‘Period of uncertainty’ –

Passos Coelho must put together a government and present its programme within 10 days of it entering into office.

“Portugal seems to be entering a period of uncertainty and the rhythm of the (economic) reforms risks being slowed down,” said Jesus Castillo, economist at Natixis bank.

The country emerged in May 2014 from a three-year, 78-billion-euro ($88-billion) international bailout.

But Portugal’s debt of around 130 percent of gross domestic product and its fragile economic recovery will provide plenty of headaches for any incoming government.

On Wednesday EU officials warned Lisbon it could face consequences for failing to present its draft budget for 2016 on time.

Portugal is the first country to fail to meet the October 15 deadline for sending budgets to the European Commission since a set of new rules for harmonising cross-border economic governance were put in place in 2013.

Before Cavaco Silva made his announcement Thursday, Spanish Prime Minister Mariano Rajoy expressed concern over the possibility that a Socialist government backed by the hard left could come to power in Portugal.

“This would be the first time in Portugal’s democratic history that the party which won the elections does not govern,” he said as he arrived at an annual congress of the European People’s Party (EPP), which groups conservative parties from across the European Union.

In Spain, polls show the Socialists could form a majority in parliament if they join forces with new anti-austerity party Podemos, another close ally of Syriza, or the new centre-right party Ciudadanos.

Attending the same Madrid meeting, German Chancellor Angela Merkel said that such a socialist coalition in Portugal would be a “very negative” development.

According to a new opinion poll, by the Aximage institute, 32.1 percent of Portuguese voters would prefer a right-left grand coalition to emerge.

Another 26.6 percent favour a leftist alliance and 20.4 percent a minority conservative government.