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Portuguese leader races to form government before EU summit

Portugal’s incoming prime minister Pedro Passos Coelho raced against the clock Tuesday to form a coalition government in time to be sworn in ahead of a June 23 summit of European Union leaders.

President Anibal Cavaco Silva instructed the head of the centre-right Social Democrats, who defeated the ruling Socialists in a general election on Sunday, to “immediately” begin work on putting together a coalition government even though tallying of the overseas vote was not yet complete.

The new government will be tasked with pushing through deep spending cuts and economic reforms agreed under a 78 billion euro ($114 billion) bailout deal reached in May with the European Union and the International Monetary Fund.

“Given the situation the country finds itself in, it would be good if the government was sworn in as quickly as possible,” the president said late Monday after meeting with Passos Coelho.

The president said “it would be desirable” if the new government was already in power by the time of the summit but if this was not possible Portugal would be represented in Brussels by outgoing prime minister Jose Socrates.

EU leaders are expected to discuss the European debt crisis at the summit and Greece’s need for more money a year after it received its EU-IMF bailout.

Under the Portuguese constitution the president can only formally nominate the prime minister once the final official results of the election, including the overseas ballots, are published, which will be on June 15.

With four seats related to the overseas vote yet to be decided, the Social Democrats won 105 seats in the 230-seat legislature.

Passos Coelho, who has no previous government experience, said on election night that he would seek to form a coalition government with smaller conservative CDS-PP party, which finished third with 24 seats.

The two parties together have a combined 129 seats, an absolute majority in parliament. They last governed in a coalition between 2002 and 2005.

They will now have to set aside their differences to forge their new coalition in record time.

CDS-PP leaders have said they do not want to negotiate with the Social Democrats in public, but they are thought to be at odds over the distribution of ministers from each party.

Horse-trading is bound to be intense because Passos Coelho has promised to limit his cabinet to only 10 members.

The two parties also differ on political issues such as fiscal reforms, pensions and privatisations.

Passos Coelho told the French business daily Les Echos that Portugal “must be more ambitious in terms of privatisations.” His PSD wants to sell off the state water company, the Lisbon metro and some public media.

CDS-PP leader Paulo Portas has also warned that “deep” differences over social issues will make talks on forming an alliance “very intense.”

The CDS-PP presents itself as “the party of the poorest and the underprivileged” and calls for “adjustments” to the demanding EU-IMF bailout programme.

Portas has also expressed reservations over Passos Coelho’s plans to replace only one in every five employees who leave the civil service due to retirement or for another job.

The daily Publico newspaper’s Tuesday editorial said the election gave Passos Coelho a mandate to implement a “programme of change” but that doing so on such a short timeline would be a “trial by fire.”

Outgoing finance minister Fernando Teixeira dos Santos said he is compiling a dossier on the urgent measures that must be taken by the end of the year according to the bailout deal to help ensure a smooth handover.

“The deadlines are demanding and require a lot of work. We have only to look at what is happening in Greece to understand that Portugal cannot fail,” he told reporters.