Portugal’s insurgent left: a worry for Europe?

Soon after a centre-right minority government takes the helm following Portugal’s inconclusive elections, it faces the real risk of being overturned by an unprecedented alliance between socialists and far-left parties.

The political limbo in the wake of the October 4 polls has raised the spectre of possible spillover effects elsewhere in Europe.

Prime Minister Pedro Passos Coelho’s centre-right bloc lost its parliamentary majority but won more than 38 percent of the vote despite overseeing four years of painful austerity in the bailed-out country.

The left, now in the majority, has threatened to bring down the new government as soon as it presents its programme, which it must do by November 9.

Question: If the left causes the government to fall, can it count on coming to power?

Answer: Appointing Socialist Party (PS) leader Antonio Costa to head a new government is “the most likely scenario” available to President Anibal Cavaco Silva, political scientist Jose Antonio Passos Palmeira told AFP. The conservative president could do so despite his vocal aversion to the Socialists’ allies — the Left Bloc, which is close to Greece’s anti-austerity Syriza party, and the Communists, both accused of shaking investor confidence.

Q: Can Portugal’s political instability spark a crisis in the eurozone?

A: Passos Palmeira thinks not. “The Portuguese have been traumatised by the sacrifices they have had to accept under the rescue plan. They will do everything they can to avert a new crisis,” he said.

Two weeks ago, Costa told AFP that a left-wing government would respect trade commitments and avoid any new crises in the eurozone.

“Europe can rest easy, the Socialist Party is not Syriza,” Costa said, adding that the Communist Party and Left Bloc “have clearly stated that leaving the euro and renegotiating the debt were not on the negotiating table.”

Commerzbank analyst David Schnautz however said that a government allied with the far left “risks being instable and is clearly a source of worry for investors.”

Portugal’s borrowing rates have started to go back up since the elections, with the yield on its 10-year bonds rising from 2.29 percent to 2.44 percent.

Q: Can Portugal become a new Greece?

A: While Costa succeeded in winning the support of socialist leaders in the European Parliament, the head of the conservative European People’s Party, Joseph Daul, spoke out against a future “extremist government”, warning that “what happened in Greece could happen in Portugal.”

But unlike Greece, Portugal emerged from its international bailout regime in May 2014 and has even begun paying back its IMF debts early.

Despite its massive debt equalling some 130 percent of GDP, “Portugal is not at all like Greece,” said Pedro Lino of the Dif Broker brokerage house.

Q: Can Portugal’s Socialist-led anti-austerity alliance inspire copycats in Europe?

A: That is the fear of the head of Spain’s conservative government, Mariano Rajoy.

Like Passos Coelho, Rajoy oversaw a gruelling austerity regime. Now his Popular Party faces general elections in December, and if it fails to win an absolute majority, the Socialists could join forces with Spain’s new anti-austerity party Podemos, a close ally of the Left Bloc.

Q: Would the alliance be able to bring an end to Portugal’s four years of austerity?

A: According to Costa, a left-wing government “would be based on the PS programme.” The Socialists promise to reduce the budget deficit but are counting on increased household income to revive the economy.

To win the support of the radical left, the PS may have to take on board some of its demands, which include raising the minimum wage and unfreezing pensions.

But they will have little room for manoeuvre. “Any government would have to continue austerity, like Syriza had to in Greece,” said economist Joao Cesar das Neves.