Portuguese voters head to the polls Sunday to elect a new government, which will be tasked with implementing tough austerity measures as part of a 78-million-euro EU bailout plan. Opinion polls indicate a centre-right coalition is a likely outcome.
AP - Portuguese voters were electing a new government Sunday to steer them through expected years of recession and grinding austerity measures being adopted in return for a ¤78 billion ($114 billion) bailout.
Portugal is one of the eurozone countries with an economy wrecked by debt, compelling it to call for a rescue loan two months ago.
A recent election in Ireland - which also needed a bailout - spelled the end of the government, and polls indicate Portugal’s main opposition Social Democratic Party will unseat the Socialists.
The winner will inherit a record jobless rate of 12.6 percent and a forecast economic contraction of 4 percent over the next two years in what is already one of western Europe’s poorest countries.
Necessary welfare and pay cuts, tax hikes and promises of strikes from trade unions will also present tough challenges for the new administration as it tries to engineer the growth Portugal will need to cut itself free of its ruinous debt load.
Portugal is locked into debt-reduction targets established as part of the bailout deal, limiting its room for maneuver. But President Anibal Cavaco Silva said the new government will have “much to decide and do” and appealed against abstention among the country’s 9.6 million registered voters.
“The fact that the elections take place at a time of sacrifice and serious doubts about our future makes it especially important that each person expresses their will,” Cavaco Silva said in a televised address to the nation Saturday night.
Any sign Portugal is not abiding by the terms of its bailout agreement with its European partners and the International Monetary Fund, who put up the money, will likely aggravate Europe’s debt crisis. There are already signs of bailout fatigue among the continent’s wealthier nations as Greece’s financial future remains uncertain.
Keeping the political peace won’t be easy.
The election - the country’s second in two years - comes after months of political squabbles over how best to reduce the debt burden. Opposition parties refused to accept the outgoing Socialist government’s austerity plans, prompting the administration to resign and worsening Portugal’s financial plight.
The center-right Social Democrats, favored to win by opinion polls, have asked for an emphatic endorsement at the ballot box that would give them a strong mandate to enact unpopular fiscal measures and introduce longer-term economic reforms such as making it easier to hire and fire workers - a proposal parties on the left have balked at.
If he falls short of a strong majority in the 230-seat Parliament, which approves legislation, Social Democrat leader Pedro Passos Coelho could invite the smaller, conservative Popular Party to join it in a coalition government.
All three main parties gave their blessing to the bailout deal, though they differ over how to meet the debt targets and the possible privatization of public services.
The Portuguese Communist Party and its like-minded rival the Left Bloc, which are each expected to get less than 10 percent, have fought against economic liberalization but could potentially support the Socialists in Parliament.
The Bank of Portugal said in a report last month that economic hardship will be “particularly severe” in coming years, with an “unprecedented” drop in family income.
Portugal has lived beyond its means during the past decade of average annual growth below 1 percent. It took advantage of cheap loans as a member of the 17-nation eurozone to build up debt which financed its western European lifestyle of welfare entitlements and job security.
Portugal needs to increase its exports amid feeble domestic demand. As a member of the eurozone it can’t devalue its currency to make its goods cheaper abroad, but it can reduce pay and take other steps to cut costs.
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