It is unclear if the left-of-centre alliance brings down the government during Tuesday’s vote whether Portugal’s president will ask Socialist Party leader Antonio Costa to step in or if he’ll install a caretaker administration until fresh elections can be called. It is outnumbered by left-of-center lawmakers in Parliament, and they vow to unseat it by rejecting its policy proposals.
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The leftist parties, after weeks of debate, now appear more united and are set to use their parliamentary advantage to topple the minority administration and back a new Socialist-led administration.
However, markets are starting to worry – the Lisbon stock exchange dropped 3 percent Monday with banks leading the fall, while the yields on Portugal’s 10-year bonds climbed to a four-month high.
CONSERVATIVE Prime Minister Pedro Passos Coelho opened a two-day debate in parliament yesterday that is expected to conclude with a vote today to make his government the shortest ever.
“I wouldn’t hesitate to say that we’re already paying a certain price for the uncertainty around the end of this debate and what eventually might happen after this debate ends”, Coelho said in parliament on Monday.
The deals mean that “conditions are in place for stability for the duration of the legislature, as well as conditions to govern with joint appreciation of fundamental instruments of governance, notably state budgets”, he said. Afterwards, Mr. Passos Coelho tried to enlist the support of PS but Mr. Costa instead courted the Left Bloc and Communists. The Socialists could roll back reforms and spending cuts introduced during Portugal’s debt crisis and bailout even though they have promised to stick to European budget goals.
The Socialists are trying to return to power after Coelho led the first coalition government to survive a full term in office since four decades of dictatorship ended in 1974. “There is a declaration of general support, but then it’s budget negotiations case by case, which is problem-prone”, said political scientist Antonio Costa Pinto.
The Socialists want to return disposable income to households to boost the economy, overturning a few wage cuts imposed under the centre-right government.
On a left-right economic spectrum, few parties are more to the left than the Left Bloc or the Communist, according to the European Union Centers of Excellence at Chapel Hill, North Carolina.
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Germany has previously expressed concern about the possibility of a swing from Mr. Passos Coelho’s fiscally conservative government, which worked closely with global lenders during Portugal’s debt crisis and bailout, to an alliance of anti-austerity parties.
