United we stand

By Inês Lopes [email protected]

President of Portugal Cavaco Silva spoke to the nation on Wednesday and called for a “mid-term pact of understanding” between the three main parties – PSD, CDS-PP and PS – in order to form a “salvation” government that will see the country through to the end of the bailout programme in June 2014 and to ensure public debt sustainability.

Early elections were rejected before then, but a date must be set for these to take place and coincide with the end of the financial adjustment programme, said Cavaco Silva.

“A compromise of national salvation must involve the three parties that signed the memorandum of understanding with the troika,” he said, adding that their unity would be vital to meet the bailout obligations and said he would be calling a meeting with the leaders of the three political parties to discuss a possible agreement.

Opposition parties slammed the President’s lack of “courage” to call early elections, while political commentators described Cavaco’s proposal as “complex” but believed the solution presented was in fact a better one for a country subject to a bailout package and in need to restore market confidence.

Earlier in the week, the PSD/CDS-PP coalition government had announced a new cycle, focusing more on economic growth and less on cuts, after a conciliatory deal was reached between prime minister Pedro Passos Coelho and Paulo Portas, who was nominated deputy prime minister and in charge of coordinating economic policies, the state reform and the relationship with the Troika.

The changes announced by the ruling coalition were clearly not enough for the President of Portugal, who wants the main opposition party (PS) involved in the policy-making process.

At the time of going to press on Wednesday, it was still unknown whether or when the PSD, CDS and the PS would be prepared to sit down and discuss a new mid-term governmental accord, but should this scenario become unlikely, Cavaco Silva said the current government had the “legitimacy” to continue with or without a tri-party agreement.

The country’s financial adjustment programme suffered a slight setback last week when the CDS-PP coalition leader announced on Tuesday he would be resigning his position as minister of state and foreign affairs over the prime minister’s choice of a new finance minister to replace Vítor Gaspar, who had quit a day before.

Although, just days later, Portas said he was ready to return to government but only on his own terms, the damage had already been done. The bailout agreement with Europe’s international lenders had yet again been rocked by more instability, caused by what was dubbed a “political tantrum”.

Passos Coelho and Paulo Portas renewed coalition vows and promised to be more focused on economic growth policies, to ensure a brighter future for a country that has had more than its fair share of austerity under the former Passos Coelho/Vítor Gaspar “marriage”.

When all indicated that the deal would be accepted, in an unexpected move, President Cavaco Silvasaid he wanted a commitment not only by the coalition parties but also by the PS to take the country through the path of recovery, as the dissolution of the parliament and early elections were out of the question until June 2014.

On Tuesday, António José Seguro, the leader of the main opposition party PS, said that only a new government would be able to resolve the country’s problems.

“The Portuguese need to be able to trust in a government with legitimacy to renegotiate the terms of the economic and financial adjustment programme,” Seguro told President Cavaco Silva.

Ending vicious circle of austerity

Last week’s announcement that Maria Luís Albuquerque had been chosen by the Prime Minister as the new finance minister made Paulo Portas’ blood boil.

After all, she was Gaspar’s right-hand woman as Secretary of State for the Treasury and the PM’s first choice to oversee the country’s finances. Portas, who had long opposed the policies of the former austerity-led minister Gaspar, feared a continuation of his programme was the likely scenario.

With his coalition role further weakened, Portas was not prepared to accept the decision and his way of facing the problem was to resign the day after Gaspar stepped down, leaving Passos Coelho in a vulnerable position, after two years of largely ineffective austerity measures and only days before the Troika was due to return to Portugal (on July 15) for the eighth evaluation of the bailout.

Conditions imposed by the President of the Republic last week left the Prime Minister with no option but to accept Portas’ terms if he was to ensure the coalition passed a message of stability to the nation, the Troika and international financial markets.

Paulo Portas reassured Cavaco Silva on Tuesday that a “stronger, more stable” coalition had been achieved and that the new agreement placed the government in a better position to lead Portugal out of the crisis with policies of economic growth and employment, a clear message that Gaspar’s austerity programme was not to his liking and needed to be rethought.

The CDS-PP leader told the President that the time was right for the country to enter a new phase, one that is focused on bolstering the economy, companies, job creation and social cohesion. “These issues will be given new impetus in this second phase of the government’s coalition, while not forgetting our financial obligations,” said Portas.

The Prime Minister had even changed his speech to be in line with Portas’ views. Last Saturday, Passos Coelho vowed to give priority to economic growth policies and job creation and said he hoped the new cycle for Portugal would signify an “economic turnabout”.

Passos Coelho needs the CDS-PP for a majority in parliament to pass legislation and to comply with the terms of the bailout. The PS could soon be joining them in the decision-making process and consensus regarding the newly-proposed economic growth strategies by the coalition is likely. Seguro has long been a supporter of these strategies.

Meanwhile, a Troika source told Expresso newspaper that the next review of Portugal’s bailout could be postponed to give time for the dust to settle and for harmony to return to the Portuguese government.

On the table for the eighth assessment will be the state reform, when concrete measures should be presented.

|| Entrepreneurs say no to early elections

The business sector in Portugal needs political stability and viable solutions to restore trust, António Saraiva, the president of the Entrepreneurial Confederation of Portugal (CIP) told the President of Portugal on Tuesday.

Cavaco Silva heard that early elections would only mean more instability. “Our problems need to be solved with growth and stability,” he said.

Agreeing with the CIP president, Francisco Calheiros, President of the Tourism Confederation of Portugal (CTP), said early elections is the last thing Portugal needs, “particularly in the peak of the summer season”. “We need a functional government as quickly as possible,” he said.