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| Pedro Passos Coelho - Source: Financial Times |
After nineteen governments, twelve Prime Ministers and three external IMF assists (1977, 1983 and 2011), 9.6 million Portuguese voters faced one of the most politically interesting and complex general elections of the last years. This elections re-populated a Portuguese Parliament consisting of a single chamber (the Assembly of the Republic), composed by 230 seats, all directly elected by universal suffrage for a maximum period of 4 years. The elected governments need a majority in order to remain in office (which didn’t happen either yesterday or in 2011’s elections).
Yesterday the Portuguese voters gave PaF coalition (PSD’s and CDS’s center-right “Portugal a Frente” political coalition in power since 2011) a victory, but not the majority; setting Portugal as the first European country to re-elect a government after having imposed austerity programs and cuts. The Socialist Party (PS) suffered therefore an historical defeat given the fact that was in the opposition for the last 4 years of austerity, and Bloco de Esquerda (BE) was the surprise of the night achieving their best electoral score ever.
The past
But to provide an interesting reading (hopefully), is necessary to give a summary of the Portuguese economy and society as well as the recent year’s main political events. March and April of 2011 were extremely relevant periods both politically and economically. In March, PS (in power since 2005) presented a new pack of austerity measures which included salary and pensions cuts. The center-right opposition, Social Democratic Party (PSD) refused to approve this measures on the parliament, generating a complex political crisis that ultimately led to a 78bn euros bailout program by the so called ”Troika” – the set of financial borrowers that included IMF, ECB and the European Commission - in April 2011. In the meantime, Jose Socrates (the former Prime Minister in that period) dismissed from his position, leading to elections that put PaF’s coalition on the office, with the promise of stabilizing Portugal’s reputation on the financial markets and solve the macroeconomic imbalances.
Whilst some of the economic indicators are improving substantially, some aren’t performing so well… In the first semester of 2015, Portuguese GDP grew 1.6% (compared with the same period last year), and exports also improved 6% between May and June which led to an increase in Portuguese rating by Standard and Poor’s from BB to BB+. On the other hand, the national recapitalization of the “Novo Banco” (created after the recent collapse of BES bank), led to a boast of the deficit announced in the first semester of 2015 from 4.5% to 7.2%. The youth unemployment rate is still around 32% and the general unemployment rate 12.4% - a number that the opposition claims can be biased by the massive emigration that happened in the last 4 years (500.000 people left the country approximately) and by the massive expansion of underpaid internships. The adjustment bailout program’s main goal of decreasing the public debt and deficit to sustainable levels was not exactly met, and the public debt increased from 111% of GDP in 2011 to 130% in 2014 (a value only passed in Europe by Italy and Greece).
The campaign
More than 4 years have passed since the last elections, and even after Portugal completed his adjustment program (May 2014), the key discussed element of this elections was still the bailout. But not alone… In November 2014 Socrates, the charismatic Socialist ex-prime minister was arrested for suspicious of corruption crimes, fiscal fraud and money laundering, shocking an entire country and shacking the reputation of the Socialist Party. What he shacked as well was the nature of this elections, becoming one of the main actors of it, constantly in the center of the political debate. In such critical times, the Portuguese people deserved a stronger political debate rather than discussing who did actually called “Troika” 4 years ago, or comparisons between the most famous Portuguese prisoner and Costa. The lack of ideas for the country from the two main political parties was absurd, and topics such as education and health were barely listen on the campaign. Instead, the major candidates mainly “fought” with irrelevant weapons that in nothing contributed to a richer debate.
Ok, now the results
This Monday (5th October), the Portuguese woke up confused regarding the electoral results and their possible consequences (with fair reasons to it). The PaF coalition didn’t achieved a majority on parliament getting 36.8% of the votes, the equivalent to 104 seats. On the other hand, the main opposition party PS had an historical loss getting 32.4% of the votes (85 seats). What we did understood from this results is that governments that implement severe cuts and austerity programs can actually win elections. The statement from the political analyst from OpenEurope Vincenzo Scarpetta summarizes the central discussion of this elections: “Quite an accomplishment of Passos Coelho to win after 4 years of cuts and reforms. And quite an accomplishment of Costa to lose”.
But in the middle of these relative winners and massive losers, BE (the Left-Bloc party) leaded by Catarina Martins achieved their best general elections results ever (10.2% of the votes), more than doubling their position on the parliament from 8 to 19 seats. In fact, Catarina’s brilliant performance on the campaign allowed BE to pass the historical Portuguese Communist Party coalition CDU (17 seats), becoming the 3rd biggest political force in Portugal. The biggest irony of these elections was the fact that even though the right-center coalition won the elections, the parliament is now in his majority left-winger. In fact, more than 50% of the Portuguese voters have voted in parties that (strongly or not) campaigned against austerity. This will unquestionably generate political instabilities for the new government that will be formed by the Portuguese President Cavaco Silva in the next few days. Whilst Catarina Martins stated that the Left-Bloc will fight against the possibility of a right-wing government, Antonio Costa told to his party that he would not be part of “a negative majority, which is merely intent on creating obstacles without guaranteeing a credible alternative to govern”, discarding the idea of a coalition with the more radical left parties, BE and CDU. Both these parties defend the renegotiation of the Portuguese public debt as a solution for financial debt drama, and specially the communists, a “euro exit”; even with a moderated anti-austerity speech, Costa is not ready to go this far.
The next question is about the sustainability of this possible center-right minority government that was elected. Whilst the Socialist voters wouldn’t see with good eyes an alliance between Costa and PaF (would represent a substantial deviation from PS’s campaign), they certainly don’t want to force elections too early with the fear of repeating the disastrous results his party got. A rational idea would be to wait and agree to a minority government and then try to force early elections later in 2016 or 2017.
The future
Is therefore times of interesting political activity Portugal. The European institutions certainly see the center-right partial victory as a social approval of the austerity programs applied in Greece, Ireland and Portugal. But internally, the President Cavaco Silva is tomorrow (06/10/2015) starting the conversations with Passos Coelho to probably propose the formation of an unstable minority government that has an “anti-austerity” majority against it. Since Antonio Costa refused to leave his role as president of the Socialist Party, he directly place himself in the center of this complex negotiations, especially if we think that the 2016 government budget will be voted in the next few weeks and needs the majority of the votes for approval. Furthermore, in January 2016 the Portuguese voters will be called again this time to vote for a new President of the Republic, substituting the center-right Cavaco after almost 10 years in power.
A final note to PAN (People, Animals and Nature party) that were the first “small” party to elect a member in the parliament in almost 15 years; and to the electoral turnout rate, which unfortunately reached a maximum level for Portuguese general elections since the country returned to democracy in 1974; a rainy day, where the Portuguese football league didn’t agree to stop and Sporting, Porto and Benfica all played, possibly contributed to this sad numbers.
Despite who won (or who will win more from the political output of this elections), one thing is certain: the next Portuguese government will not have a lack of things to do and to worry.
Joao Cunha
Portuguese, 23 years old, born in Lisbon, graduated in economics in Amsterdam, currently living in London
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