Socialist leader Antonio Costa, who has been negotiating the creation of a left-of-center majority government with the Communist Party and radical Left Bloc, accused the president of triggering “a pointless political crisis”.
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Left-wing leaders reacted furiously to Cavaco Silva’s speech.
The political impasse meant Portugal on October 15 became the first eurozone country to miss its deadline for presenting a draft budget to the European Commission under the “European Semester” rules introduced in 2011 to ensure greater supervision of government accounts. Mr. Cavaco Silva said this followed longstanding constitutional precedent.
The Socialist Party responded by repeating its threat to block Mr. Passos Coelho from governing.
“The president is behaving like the leader of a sect, using blackmail and seeking to create instability”, said Left Bloc leader Catarina Martins.
The president’s decision wasn’t a surprise.
Portugal’s president put coalition leader Pedro Passos Coelho back as prime minister on Thursday, igniting protests from leftist parties that could quickly challenge a new centre-right government in parliament where they have majority control.
If parliament rejects the prime minister’s program, the president would have to decide whether to name Mr. Costa to replace him or leave Mr. Passos Coelho’s government in place, but largely without power, until new elections could be called.
It got 38.4 percent of votes in the election but is outnumbered in the 230-seat Parliament, where its anti-austerity opponents have 122 seats.
Germany is concerned about the possibility of a swing from Mr. Passos Coelho’s fiscally conservative government, which worked closely with worldwide lenders during Portugal’s debt crisis and bailout, to an alliance of anti-austerity parties.
Portugal took a €78 billion bailout form the European Union and worldwide Monetary Fund in 2011.
Portugal is still running one of the highest budget deficits in the eurozone. Exports rose as a sharp contraction of domestic spending forced companies to look elsewhere for growth.
Its economy is improving but remains fragile, and the center-right coalition says more austerity will be needed.
In the event of Passos Coelho’s cabinet being brought down and the president opts to hand over the country’s reigns to the leftists alliance, there will be a few major policy shifts.
The gap between their proposals widened after the election as Mr. Costa sought a pact with the far-left.
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Less certainty surrounds how the generally moderate Socialists will deal with euro-scepticism of the far left, with both parties proposing a return to the escudo. They also would unfreeze pension payments and abandon a Socialist proposal to give companies even more power to hire and fire.
