Wednesday

21st Feb 2018

Opinion

Portugal’s leftist government: Is there need for concern?

  • At an anti-troika demonstration in Lisbon in 2013. Austerity can lead to "reform fatigue". (Photo: Pedro Ribeiro Simoes)

An anti-austerity leftist alliance formed with two radical left parties in a country that was praised as an austerity success story was unexpected, and it could cause political uncertainty.

On 11 November, a motion of rejection put forward by the alliance of leftist parties led by Antonio Costa ousted the conservative minority government of Pedro Passos Coelho after only 11 days in office. Mr Costa was appointed prime minister on 24 November.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

  • Socialist PM Antonio Costa wants to implement a "socialist programme". (Photo: Partido Socialista)

The main surprise and concern caused by the new government is the presence of two radical left parties that, according to the European Union Centers of Excellence [EUCE, a network of US universities focusing on EU affairs], are on the extreme left of the economic spectrum.

The Communist Party and the Left Bloc (BE) are among the first ten most left-wing parties of the 268 political parties in the EU assessed by EUCE.

Reasons for concerns

Nevertheless, the election results do not necessarily prove the ineffectiveness of the austerity programme.

Portugal completed its three-year bail-out without a credit safety net. Exports have increased to almost 40 percent of GDP, up from 34.3 percent in 2011, being considered “export miracles” by the International Monetary Fund (IMF).

The economy is expected to expand by 1.7 percent this year, with continuous growth for the four last quarters, as The Economist notes.

On the negative side, The Guardian assesses Portugal as “western Europe’s poorest nation”. There are indeed reasons for concern. Portugal is still recovering from the debt crisis and remains “highly vulnerable” (IMF).

The unemployment rate is 30 percent among the young, and 12 percent for the general population (although it went down from 17.5 percent two years ago). The public debt has skyrocketed to 130 percent of GDP.

Mr Costa intends to implement a “socialist programme” and “break the cycle of impoverishment”. The minimum wage is expected to raise to €600 per month by 2019. That would indeed be a boost taking into consideration that 20 percent of the population lives under the poverty line.

Measures against spending cuts, pay cuts for public sector workers, and pension freezes, as well as the restoration of four annual public holidays, are also planned. Catarina Martins, leader of BE, is even more adamant when she declares that "we know that it is necessary to do much more than what the Socialist Party is willing to do.”

Ideological differences

Portugal’s president Anibal Cavaco Silva warned the Socialist Party not to enter into a compromise agreement on cuts with the two far-left parties. The warning comes amid signals from the European Union for Portugal’s failure to submit its 2016 budget proposal which was due mid-October.

The ideological differences between the three parties will continue to constitute a headache for the new government, although judging by the seats in the Assembly of the Republic, the two radical Portuguese parties would offer parliamentary support to the mainstream Socialists rather than lead the government.

The intention to suspend the privatisation of state assets started as part of the austerity programme agreed with the Troika by the outgoing centre-right government will also be a challenge for the new government.

Novo Banco, which emerged from the collapse of Banco Espirito Santo SA, is in a particularly fragile state and needs a capital injection of €1.4 billion according to the stress test conducted by the European Central Bank (ECB). The sale process of its assets has been in limbo as the bids were too low. The restructuring plan of the bank could lead to the unemployment of 1,000 of its staff. Novo Banco has nine months to fill the gap in its finances.

Honouring commitments

The leftist government seems to be more united on civil rights issues. The Left Bloc’s proposal of Portugal’s first law on domestic violence (Law on Prevention of Domestic Violence and Protection and Assistance for Survivors) passed in Parliament in 2009 and was backed both by the Socialist Party and the Communist Party.

The process of surrendering to the harsh demands of austerity can be difficult and can lead to “reform fatigue” [an expression used by the IMF]. Voters may change their political views and experience social discontent when cuts in government spending and higher taxes become routine. But Spain and Ireland are two good examples that austerity can work if there is enough fiscal discipline. They now have the fastest growing economies in the eurozone.

Portugal has shown for four years that it has the fiscal rigour and determination to avoid debt default and missing eurozone deficit targets. Mario Centeno, the new finance minister and the Socialist Party’s economist strategist, plans to lower the debt to 118.9 percent of GDP by 2017 and achieve a deficit of 1.5 percent of GDP by 2019 (from 3 percent this year).

His expectations may be too ambitious. However, his promise that “over time conditions have to be created so the debt can be paid” and that the new government would “abide by its European responsibilities and honour all its commitments” may be reassuring not only for investors, but also for Portugal’s citizens.

Margareta Hanes is a researcher at the London-based Centre for Geopolitics & Security in Realism Studies (CGSRS)

Analysis

How Portugal's leftist 'contraption' works

After six months in power, the improvised left-wing coalition between socialists, leftists and communists has managed to rule and even thrived, to many Portuguese's surprise.

Analysis

We are not (yet) one people

Talks on the next EU budget will start on Friday. Brussels wants to do much more than before – and needs a lot more money. But arguing about funds won't be enough.

News in Brief

  1. Commission fines car cartels €546m
  2. Juncker: 'nothing' wrong in Katainen meeting Barroso
  3. Juncker appoints new head of cabinet
  4. MEPs decide not to veto fossil fuel projects list
  5. Factory relocation risks drawing Vestager into Italian election
  6. Irregular migration into EU drops to four-year low, says Frontex
  7. Macron's new migrant law faces opposition in parliament
  8. MEPs approve anti-smuggling bill on tobacco

Stakeholders' Highlights

  1. Macedonian Human Rights Movement Int.European Free Alliance Joins MHRMI to End the Anti-Macedonian Name Negotiations
  2. International Climate ShowSupporting Start-Ups & SMEs in the Energy Transition. 21 February in Brussels
  3. Mission of China to the EUChina-EU Tourism Year to Promote Business and Mutual Ties
  4. European Jewish CongressAt “An End to Antisemitism!” Conference, Dr. Kantor Calls for Ambitious Solutions
  5. UNESDAA Year Ago UNESDA Members Pledged to Reduce Added Sugars in Soft Drinks by 10%
  6. International Partnership for Human RightsUzbekistan: Investigate Torture of Journalist
  7. EPSUMovie Premiere: 'Up to The Last Drop' - 22 February, Brussels
  8. CESICESI@Noon on ‘Digitalisation & Future of Work: Social Protection For All?’ - March 7
  9. UNICEFExecutive Director's Committment to Tackling Sexual Exploitation and Abuse of Children
  10. Nordic Council of MinistersState of the Nordic Region 2018: Facts, Figures and Rankings of the 74 Regions
  11. Mission of China to the EUDigital Economy Shaping China's Future, Over 30% of GDP
  12. Macedonian Human Rights Movement Int.Suing the Governments of Macedonia and Greece for Changing Macedonia's Name

Latest News

  1. Bank of Latvia sends deputy to ECB amid bribery probe
  2. We are not (yet) one people
  3. Intellectual property protection - the cure for Europe's ills
  4. Eastern states push back at rule of law conditions on funds
  5. Katainen explains: My friend Barroso did not lobby me
  6. A European budget: securing a prosperous future for Europe
  7. Poland wrong to log in ancient forest, says EU lawyer
  8. EU taxpayers risk bailing out MEP pension scheme

Stakeholders' Highlights

  1. Dialogue PlatformBeyond the Errors in the War on Terror: How to Fight Global Militarism - 22 February
  2. Swedish EnterprisesHarnessing Globalization- at What Cost? Keynote Speaker Commissioner Malmström
  3. European Friends of ArmeniaSave The Date 28/02: “Nagorno-Karabakh & the EU: 1988-2018”
  4. European Heart NetworkSmart CAP is Triple Win for Economy, Environment and Health
  5. European Free AlllianceEFA Joined the Protest in Aiacciu to Solicit a Dialogue After the Elections
  6. EPSUDrinking Water Directive Step Forward but Human Right to Water Not Recognized
  7. European Gaming & Betting AssociationGambling Operators File Data Protection Complaint Against Payment Block in Norway
  8. European Jewish CongressEJC Expresses Deep Concern Over Proposed Holocaust Law in Poland
  9. CECEConstruction Industry Gets Together to Discuss the Digital Revolution @ the EU Industry Days
  10. Mission of China to the EUChina-EU Relations in the New Era
  11. European Free AlllianceEnd Discrimination of European Minorities - Sign the Minority Safepack Initiative
  12. Centre Maurits Coppieters“Diversity Shouldn’t Be Only a Slogan” Lorant Vincze (Fuen) Warns European Commission