Home News Portugal swings right in early election after bailout

Portugal swings right in early election after bailout

Published on 06/06/2011

Portugal's Social Democrats ousted the ruling Socialists in an early general election on Sunday, paving the way for a new centre-right coalition government to implement the country's 78 billion euro bailout programme.

The party won 105 seats in the 230-seat assembly against 73 for outgoing Prime Minister Jose Socrates’ Socialists, the interior ministry said after only the results of votes cast abroad, which select four seats in parliament, were left to count.

That falls short of a majority but the leader of the Social Democrats (PSD), Pedro Passos Coelho, said he would immediately seek to form a coalition government with the smaller, conservative CDS-PP party which won 24 seats.

The two parties, which last governed in a coalition between 2002 and 2005, together would have an absolute majority of 129 seats.

Passos Coelho, 46, vowed “to do everything possible” to honour the conditions in the bailout agreement reached last month between Lisbon and the International Monetary Fund and the European Union in order “to regain the confidence of markets”.

“I want to guarantee to those who are watching us from abroad that Portugal does not intend to be a burden in the future to other countries that lent us the means that we needed today to face up to our responsibilities,” he said during his somber victory address.

Investors have kept Portugal’s borrowing costs close to record levels even after the bailout agreement was reached on fears that the government that emerged after the election would lack a strong enough mandate to make parliament pass the austerity measures and reforms called for in the deal.

Among the measures called for in the three-year bailout deal are tax hikes, a freeze on state pensions and salaries and a reduction in jobless benefits as well as their duration.

Socrates, in power since 2005, resigned as leader of the Socialists before the final official results were in, saying he wanted to give the party the space to “select a new leadership”.

“This defeat is entirely mine and I want to assume full responsibility for it,” he said in an address to party supporters in Lisbon.

While all three main parties agreed to the conditions attached to the bailout, they disagreed on the best way to revive the economy, which is expected to shrink by around two percent this year and the next, and achieve the required reduction in government spending.

Passos Coelho campaigned on a promise to “go beyond” the bailout conditions negotiated by his predecessor in terms of privatisations and economic reforms aimed at reducing the role of the state.

He wants to add more companies to the list of state firms to be sold under the bailout deal, such as the state water utility and the Lisbon metro.

The leader of the Social Democrats also wants to require people collecting jobless or welfare benefits to do community work to “facilitate” their return to the labour market.

Passos Coelho warned during the last week of the campaign that if Socrates were re-elected, Portugal would find itself in the same “tragic” situation as Greece, which is seeking more money just a year after it received a bailout.

But opponents have questioned his ability to steer difficult reforms through parliament because of his lack of any previous government experience.

The early election was triggered by Socrates’ resignation at the end of March after the parliamentary opposition rejected his minority government’s fourth austerity package in just under a year.

Two weeks later Portugal became the third eurozone nation after Greece and Ireland last year to request an international bailout.

Socrates argues he did everything to avoid a bailout. He blamed the PSD, who had backed previous fiscal tightening, for provoking a political crisis just to topple the government “out of a greed for power.”