Political crisis boiling in Portugal

Pedro Passos Coelho [European Council]

The Portuguese parliament is likely to reject the program of the centre-right government of Pedro Passos Coelho, plunging the country into uncertainty.

Portugal’s opposition Socialists pledged on Friday (23 October) to topple the centre-right minority government with a no confidence motion, saying the president had created “an unnecessary political crisis” by naming Pedro Passos Coelho as premier.

President Anibal Cavaco Silva appointed Passos Coelho as premier on Thursday (22 October) after his coalition won the most votes in the national election. The nomination set up a confrontation with the main opposition Socialists, who have been trying to form their own coalition government with two leftist parties who also want an end to years of austerity policies under the centre-right.

After the national election, Passos Coelho tried to gain support from the Socialists for his government, which instead started negotiating with the smaller far left Communist and Left Bloc parties to form a leftist administration.

>> Read: Portugal’s Socialist leader sees opportunity for leftist cabinet

Passos Coelho’s Portugal Ahead coalition took 36.9% of votes at the 4 October election. The Socialist took 32.3%, but together with the radical Left Bloc, linked to Greece’s anti-austerity Syriza party, and the Unitary Democratic Coalition (Communists), leftist forces have more than 50% of the vote and 122 MPs in the 230-member parliament, compared to 102 for Passos Coelho’s Portugal ahead.

The Socialists said they should be given the chance to form a cabinet, after their leader Antonio Costa said he had identified “points of convergence” in talks with the Left Bloc and the Communists.

In the meantime, Portugal’s parliament elected on Friday a Socialist speaker of the legislature as leftist parties used their majority in the new parliament to block the incoming center-right government’s candidate.

Lawmakers said Socialist Eduardo Ferro Rodrigues was elected with 120 votes, defeating the center-right Social Democrat candidate who received 108 votes.

Moreover, the Socialist Party’s national commission approved a motion for its lawmakers to “present a motion rejecting any government program,” that includes similar policies to the last government.

The vote on the speaker provided a foretaste of the left’s plans to topple Pedro Passos Coelho’s coalition. The opportunity would be provided when Passos Coelho would need to pass his centre-right government program passed in parliament in 10 days’ time.

“We’ll see what happens in parliament, if lawmakers reject the government program it will prolong uncertainty, but if it is approved it will stabilize the situation,” said Albino Oliveira, an analyst at brokerage Fincor, quoted by Reuters.

The political stand-off has prompted concerns that the country’s economic recovery after a bailout could stumble.

But, so far, bond market investors have been calm, preferring to focus on the likelihood of more quantitative easing by the European Central Bank. Benchmark 10-year bond yields were unchanged at 2.36% on Friday.

Passos Coelho’s government launched austerity measures and tax hikes during the past four years under a bailout, which plunged Portugal into a three-year recession. The country returned to growth last year, which has accelerated this year.

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