After four years in power the government lost its parliamentary majority in an 4 October general election, which saw a public backlash against austerity measures adopted following a €78 billion ($84 billion) bailout in 2011.
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After this weekend’s cementing of an alliance between the Socialists, the Left-Bloc, and the Communist Party, Aníbal Cavaco Silva, Portugal’s president, would seem to have little alternative but to allow that alliance to form Portugal’s new government should the current government of Pedro Passos Coelho lose this week’s scheduled confidence vote.
A leftist alliance has toppled Portugal’s center-right government, paving the ground for a Socialist-led administration to bring an end to years of austerity measures. Now, the progress Portugal made is in doubt, and a few fear the country could go down the same road as Greece, which has needed three bailouts since 2010. Portugal’s economy and government finances are still weak.
Several hundred government supporters gathered in front of parliament singing the national anthem and chanted “Up with (prime minister) Passos (Coelho)” while another group allied to the CGTP labour union rallied in support of the left.
“We’ve established the conditions to form a government that’s stable, responsible, coherent and lasting”, António Costa, leader of the Socialist Party (PS) and likely next prime minister, told reporters after the party’s governing body approved his deal with the far left.
It is now expected that Antonio Costa of the Socialists will become prime minister.
“The markets await the content of the economic and fiscal plans of the new government in order to assess whether they square with its overall fiscal objectives”, Antonio Garcia Pascual, chief European economist at Barclays, said in a report on Wednesday.
For their part, the Left Bloc and the Communist party dropped previous demands that Portugal’s debt be renegotiated. He would then have to put the country in the hands of Passos until the vote, or an institutional government “of the president”.
“Future of people and Portugal’s stability are at stake”.
Algarve Daily News, an English-language Portuguese news website, has more detail on the left-wing alliance set to oust the government.
Those parties have been fierce opponents of the Socialists and the conservatives during the four decades they have alternated in power. Although the head of state could choose to appoint a caretaker government instead, experts say this is unlikely.
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The political manoeuvre by the Portuguese President, Anibal Cavaco Silva, looks on the point of failure. Its sovereign debt now stands at around 130 percent of gross domestic product (GDP), while its total public and private sector debt stands at over 350 percent of GDP.
