PORTUGAL" "
A government without confidence, coupled by the need to respond to the social and economic crisis
The ongoing political crisis in Portugal isn’t easy to explain. Apparently, the root cause of the government instability is not be found within opposition political parties, nor in the unions, and neither in the – albeit peaceful – rallies of protest against austerity policies.The crisis broke out within the executive, which concentrated all of its efforts on the implementation of the “troika” (European Commission, European Central Bank and International Monetary Fund) bailout deal, having recovered their confidence after two years, along with that of other international institutions and international markets (leading to lower the interest rates on Portugal’s government debt). Moreover, the recovery of foreign market confidence took place at a high price. In 2012 GDP deficit increased dramatically, while in 2013 the economic downturn registered minor improvements. Unemployment rate skyrocketed at unprecedented levels (involving 18% of the country’s active population). Welfare benefits underwent drastic cuts while measures meant to counter the crisis turned out be counterproductive: tax revenues are declining despite tax rises.This situation triggered feelings of depression nationwide. People are hopeless and feel they have no future prospects. Thousands of Portuguese youths with academic education are emigrating. The government coalition comprises two political parties: PSD (centre-right coalition) and a smaller right-wing party (CDS). CDS opposed the predominance of financial restrictions vis a vis the economy’s freefall, and sought to put at a distance the minister of finance, the “face” of the austerity cuts. That same minister, Vítor Gaspar, largely appreciated in Germany (he has worked for ECB), resigned on July 1st, after having understood that he no longer enjoyed the political and social support needed to cut public spending, requested by the “troika”. He also admitted that he had made mistakes (the most serious of which, in my opinion, is that of having slowed down government reforms).Also the CDS leader unexpectedly stepped down 24 hours later, reportedly because he opposed the fact that Secretary of State for Treasury Maria Luis Albuquerque replaced Vitor Gaspar at the Ministry, on the grounds that she would have continued enacting the same hard-line policies aimed at fiscal consolidation. That could be the end of the government in force, thus leaving no alternative to early elections, which would increase the risks of a deferral of Portugal’s government debts to the market and a second bailout plan (as it happened in Greece).Negotiations between PSD and CDS are ongoing, aimed at identifying a formula for the continuation of the government. Reportedly, the President of the Republic, Anibal Cavaco Silva, has asked for guarantees so as to avert the dangers of a weak government that risks sparking off yet another political crisis in a few weeks’ time. The alternative is to schedule national elections for the end of September, which entails high costs in terms of the external credibility of the Country. Less than a year before the end of the adjustment programme negotiated with the international “troika”, the outbreaking of the government crisis risks making many of the sacrifices undertaken by Portuguese citizens seem pointless.
