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25/09/2016

President of Portugal calls for election, as no clear leader emerges

Elections

President of Portugal calls for election, as no clear leader emerges

Anibal Cavaco Silva [European Commission]

Portugal’s general election will be held on 4 October, the president decided yesterday (22 July) as he urged politicians to ensure that the next government has a majority in parliament amid opinion polls that show no clear leader.

President Anibal Cavaco Silva, the country’s head of state, said in a televised address that it was up to political parties to guarantee stability as Portugal continues to wrestle with tough economic times after exiting a bailout last year.

“Due to the great challenges that it faces, Portugal is one of the countries in Europe where political stability is most necessary,” Cavaco Silva said, urging politicians to follow the example of European countries with majority coalition governments.

All recent opinion polls have indicated a hung parliament, with neither the centre-right coalition government, made up of the Social Democrats and rightist CDS-PP, nor the opposition centre-left Socialists leading beyond the margin of error.

The last poll put the Socialists at 36.7% and the ruling coalition at 34.6%.

“It is extremely desirable that the next government has a consistent majority in parliament,” said the president, whose constitutional powers means he has to approve the formation of the government and decides when elections are held.

Analysts have said the president could push for a so-called grand coalition government between the Social Democrats and Socialists if there is no clear winner at the election.

Portugal’s economy returned to growth last year after three years of recession and after the country exited an EU/IMF bailout in May 2014. But Portugal still has one of the highest debt levels in Europe, growth remains low and unemployment is high.

Any letup in efforts to cut the budget deficit could turn investors’ focus back on Portugal’s high debts even though the European Central Bank’s quantitative easing has ensured that bond yields remain low. Fears over Athens’ possible exit from the euro in recent weeks helped drive Portuguese yields higher, though they stayed low by historical standards.

The country’s previous minority Socialist government was forced to seek a bailout in 2011 during Europe’s debt crisis when it was unable to pass economic policies in parliament. It subsequently collapsed. 

Last April the popular Lisbon’s Socialist mayor Antonio Costa stepped down to fight Portugal’s parliamentary elections this autumn. At that time, he was tipped to easily succeed centre-right Prime Minister Pedro Passos Coelho.

>> Read: Popular Lisbon mayor steps down to run in general election

Background

After Greece and Ireland received EU-IMF bailouts to cope with their swollen public debts and deficits, Portugal was the next eurozone country that needed to be rescued, despite efforts to put its public finances in order.

The Iberian country’s €214 billion of debt is the third highest in the euro region, as a percentage of gross domestic product.

Portugal signed up to a "tough but fair" €78 billion international bailout in May 2011, which has driven the country into recession for two years.

In June 2014, Portugal decided to do without the last payment from its international bailout program, after the country's constitutional court rejected a series of austerity measures.

>> Read: Portugal to do without final bailout payment