Portents of doom were delivered in spades in parliament on Tuesday when the left-wing alliance of PS Socialists, PCP communists, green party PEV and Bloco de Esquerda MPs defeated the centre-right government. But as the country digested the fact that Portugal has well and truly entered uncharted territory, international observers were already turning their attention to the nitty-gritty of the left wing’s message which boils down to a four-word pledge: “Same direction, different speed”.
In an interview with the Financial Times, Mário Centeno, the Harvard trained academic tipped to become the country’s next finance minister, stressed: “We will continue on the path of fiscal consolidation. It is not the direction we challenge, but the speed of travel.”
It was an interview described in the Portuguese media as “designed to calm markets” that only the day before had seen €2 billion wiped off Lisbon’s stock exchange and government borrowing costs reach a five-month high.
But the truth is the country still has to wait for President Cavaco Silva’s “decision”.
Will he accept PS leader António Costa’s contention that an alliance with avowed Marxists can bring the political sustainability that the country needs?
As Diário de Notícias explains, the PCP and BE could decide at any moment to bring motions of censure against the Socialist programme they have pledged to support.
It is a risk Costa appears prepared to take. Talking to journalists on Tuesday, he claimed all parties involved in the agreements that brought down the minority centre-right government after an acrimonious two-day debate in parliament are committed to the defence of the Social State – to fighting poverty, social and economic inequality and a precarious labour market that has seen hundreds of thousands either leave the country or ‘disappear from sight’.
Mário Centeno, the architect of the left-wing alliance’s economic programme, told the FT: “Two thirds of the people who lose their jobs, receive no unemployment benefit at all.”
It is a reality that the outgoing PSD-CDS coalition had been at pains to mask throughout the four-year legislature.
But Centeno stressed it is not easy to reduce the PS programme to two or three slogans.
“We will continue to bring down the deficit and debt, but at a slower pace,” he repeated. “This will create the economic space needed to alleviate the very serious financial restraints families and companies face.”
A PS government “would remain committed to keeping Portugal in the euro, complying with the EU’s fiscal compact and ensuring the country avoided being sanctioned for excessive debts”, he told FT journalist Peter Wise.
There is “no question” of a PS administration seeking “any form of debt restructuring” – an approach favoured by the Left Bloc and PCP.
“Nobody with any sense thinks of not paying debts they have contracted,” said Centeno, adding “we will have to find a way of doing what I think is most important for financial markets and the economy – bringing down debt at a pace that is compatible with growth”.
Brussels “will be receptive” to the new government’s ideas
As for Brussels’ attitude to a government led by the left, Centeno told the FT: “There is a much greater perception today of the need to manage debt in the EU.”
Costa himself spent time and effort drumming up support in Brussels in the wake of Portugal’s inconclusive elections last month, and has seen both the president of the European parliament Martin Schulz and German finance minister Wolfgang Schauble make positive noises about a future left-wing executive.
Thus now – once more – the country awaits a decision by President Cavaco Silva. Before the elections which saw the Portugal à Frente coalition “win” without any chance of a convincing majority, Cavaco declared that he had studied all the likely outcomes. Nonetheless, Diário de Notícias writes that it is “inevitable” that he will once again talk to political leaders, economists and business figures.
One aspect that does seem to be dipping in popularity is the scenario of a caretaker government left in the hands of outgoing prime minister Pedro Passos Coelho.
This would leave Portugal incapable of following reforms or presenting its long overdue State Budget to Brussels before elections that, for a multiplicity of Constitutional reasons, could not go ahead before June or even July.
|| Pocket guide to new government’s policies
One of the most popular ‘changes’ promised by an incoming PS-led government is the reduction of IVA payable by restaurants from 23% to 13%. It is a measure long-demanded within the sector that was decimated by the increase brought in by the PSD-CDS coalition.
Other changes involve: unfreezing pensions, restoring former national holidays, gradually increasing the minimum wage, introducing tax incentives for small and medium sized companies, creating a rates’ cap, reducing the size of classes in schools, “progressively” working back to supplying free schoolbooks, reversing privatisation deals and outlawing the seizure of family homes to pay tax debts.
There are many other measures – and quite a few that have yet to see all parties agree.
It is here that doom-mongers took their relish on Tuesday as the Republican Assembly descended into Punch & Judy-style recriminations.
With the outgoing finance minister warning that “we who work in Portugal and raise children here do not want to see chaos”, Deputy PM Paulo Portas – the man whose “irrevocable decision” was turned round the minute he was offered a plum post – warned Costa “don’t come to us for help” if “you can’t handle the explosive demagogy in competition between the BE and PCP on one hand, and the realism of Brussels on the other”.
As everyone in and outside parliament agrees, ‘only time will tell’.
By NATASHA DONN [email protected]
Photo: Tiago Petinga/Lusa
