Portugal’s president accepted yesterday (27 October) the line-up of a new minority government that will be sworn in on Friday, starting the countdown on persuading the opposition-dominated parliament to accept its program or face the collapse of the cabinet.
Pedro Passos Coelho was named prime minister on Thursday after his coalition won the most votes in the national election on 4 October but lost its majority in parliament, which swung to leftist parties who have tried to form their own coalition.
>> Read: Political crisis boiling in Portugal
The Socialists have already pledged to topple the center-right minority cabinet, most of whom served in Passos Coelho’s previous administration, with a no-confidence motion and said the new government’s “days are numbered”.
The political stand-off has prompted concerns that the economy’s recovery, after a debt crisis and an international bailout, could stumble.
Under Portuguese law, the new government has to present its program to parliament within 10 days after taking over. There are then three days of debates and votes and if it is rejected, the fledgling government will fall.
“It’s continuity of past policies without any evolution … It’s a depleted government unable to minimally interact with the society. It is a government without future and well aware of it,” Socialist lawmaker and spokesperson Ana Catarina Mendes told reporters.
The rejection came despite new ministerial portfolios – for culture and administrative modernization – set up in an attempt to engage the Socialists who advocated the creation of these ministries in their election program.
The Socialists have been negotiating a coalition agreement with the Left Bloc and the Communists, and all three parties have criticized President Anibal Cavaco Silva for naming Passos Coelho as prime minister, calling it a waste of time.
Passos Coelho’s Social Democrats have in the past days called for renewed dialogue with the Socialists.
Paulo Portas, leader of the junior ruling coalition partner CDS-PP, will stay on as deputy prime minister in the new government.
Maria Luis Albuquerque who has served as finance minister since mid-2013, will keep the portfolio in the new cabinet, along with most other ministers.
Despite the uncertainty, bond market investors have so far focused instead on the likelihood of more quantitative easing from the European Central Bank that have kept bond yields low.
Benchmark 10-year bond yields edged up to 2.48% yesterday – but were only slightly above 2.3% before the election and well below 17% at the peak of the financial crisis.
Passos Coelho’s previous government pursued austerity measures and tax hikes during the past four years under a bailout that plunged Portugal into a three-year recession. The economy returned to growth last year and accelerated this year.