Portuguese president meets parties on political crisis

Portugal’s President Anibal Cavaco Silva met Friday with leaders of political parties in a bid to resolve a deepening political crisis as rail and bus workers went on strike over pay cuts.

Analysts said the most likely outcome to the crisis caused by parliament’s rejection of the government’s austerity programme would be a snap election at the end of May or early June.

Adding to the sense of crisis Friday was a transport strike affecting rail and bus services.

Workers at rail services operator CP-Comboios de Portugal and railway network manager Refer-Rede Ferroviaria Nacional began a 24-hour strike against cuts to their pay, causing headaches for thousands of commuters.

“We are fighting to not end up with miserable salaries,” railway union leader Luis Bravo said.

Lisbon bus drivers also refused to work overtime hours Friday in a strike over pay cuts.

Tens of thousands of people have taken to the streets in Lisbon and other cities over the last two weekends in protests against the government’s economic policies.

Prime Minister Jose Socrates quit late on Wednesday after all five opposition parties voted against his minority government’s latest package of austerity measures, which proposed further tax hikes and social spending cuts.

The austerity plan — the government’s fourth in a year — was aimed at preventing Portugal from becoming the third euro zone country after Greece and Ireland to seek a multibillion-euro bailout from the EU and the IMF.

The lack of agreement on fresh austerity measures and the ensuing political crisis has heightened the risk that Lisbon will not be able to refinance its debt without outside aid.

Late on Thursday Standard & Poor’s cut Portugal’s credit rating by two notches, from A- to BBB, the lowest attributed by any rating agency.

The move came just hours after Fitch downgraded Portugal’s rating by two notches from A+ to A- in the wake of the prime minister’s resignation.

The president could invite parties with reprsentation in parliament to form a coalition government instead of calling elections but given the high level of animosity between party leaders at the moment this option has been largely dismissed.

Party leaders have all declared that they would prefer to go to early elections.

Under the Portuguese consitition, the president must also summon an advisory body called the Council of State, before he can dissolve parliament and call an election, to be held no sooner than 55 days after the announcement.

Socrates, in office since 2005, has said he would stand again.

“The political crisis can only be resolved through a decision on the part of the Portuguese people. I will submit myself to this decision with great determination and the same desire to serve my country,” he said when he announced his resignation.

Portugal centre-right opposition could win an absolute majority in a snap election, a poll published Friday showed.

The Social Democratic Party (PSD) would capture 46.7 percent of the vote against 24.5 percent for Socrates’ Socialist Party, the Marktest poll for TSF radio and business daily Diario Economico found.

It is the first survey to be published since the prime minister resigned.

The Socialist Party took 36.5 percent of the vote during the last general election in September 2009 compared to 29 percent for the PSD.

Socrates has seen his popularity drop as he has cut civil servants’ pay, raised sales taxes and slashed spending to rein in a public deficit that hit a record 9.3 percent of GDP in 2009, the fourth-biggest in the euro region after Ireland, Greece and Spain.