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Portuguese right agrees coalition

Portugal’s centre-right Social Democrat party (PSD) signed a coalition deal with a smaller right-wing party Thursday, pledging to transform the country and win the confidence of the markets.

The agreement between the PSD and the Democratic and Social Centre (CDS-PP) followed June 5 elections which ousted the Socialists, in power since 2005, against a background of deep financial crisis.

The two parties “recognise the absolute necessity to give Portugal a majority coalition government, the primary condition to bring the country out of crisis and respect the commitments made to the European Union and the International Monetary Fund,” the agreement said.

It was signed the day after PSD leader Pedro Passos Coelho, 46, was named as prime minister by President Anibal Cavaco Silva with the task of implementing a drastic austerity package imposed by the EU and IMF.

The programme involves spending cuts and economic reforms Lisbon agreed last month in exchange for a 78-billion-euro ($110-billion) bailout.

Passos Coelho, who signed Thursday’s agreement with CDS-PP leader Paulo Portas, said that they would respect the austerity programme but “we must also spring some surprises.”

“Faced with what is happening in Europe it is more than ever essential for Portugal to make the difference,” he said.

He was speaking as Greece faced political and financial chaos in trying to introduce new austerity measures to meet EU and IMF demands.

“The Portuguese know the situation and the necessity for profound change,” Passos Coelho said. “The country must effect a great transformation.”

Final results released Wednesday by the interior ministry showed the PSD had won 108 seats in the 230-strong chamber while the CDS-PP won 24 seats.

The 132 seats they command between them gives them a comfortable overall majority.

The Socialists won 74 seats, the Communist-Green CDU coalition 16, while the far-left Left Bloc picked up eight seats.

The three leading political parties have all broadly agreed to implement the loan conditions laid out by the EU and the IMF.

Portugal owed 160 billion euros at the end of 2010 and its deficit for the year was 9.1 percent of GDP, more than triple the rate allowed among EU members. Unemployment for 2010 stood at 11 percent.

Passos Coelho had previously agreed to go beyond the conditions set out by the EU and IMF, specifically favouring a more aggressive privatisation plan.

“What awaits is a gigantic task,” he warned Thursday. “We must live through years of great difficulty.”

“Within two years we must return to the markets,” the new prime minister added. “We will do all we can to make it sooner.”

The two parties also signed an undisclosed accord on their government programme, but Passos Coelho refused to say when he would finalise the line-up.