Portugal

I - Political context

Political change      
I.1
What is the political context of the Eurozone crisis period in Portugal? Have there been changes in government, elections, referenda or other major political events during the period of 2008-present?

There were parliamentary elections on 27 September 2009 and on 5 June 2011, as well as presidential elections on 23 January 2011.

The elections in 2009 resulted in the re-election of the Socialist Party (PS), centre-left political formation, as the first party in the country. However, in the context of the Eurozone crisis and the already ongoing unpopular reforms, Socialists lost the majority; José Socrates formed a minority government (see question X.1).[1]

Anibal Cavaco Silva, Portugal’s conservative president was re-elected on 23 January 2011.

The Prime Minister resigned on 23 March 2011 after a defeat in a parliamentary vote on a package of austerity measures that came to be known as “PEC IV” (Stability and Growth Pact, SGP 2011-2014). Pedro Passos Coelho, at the time Democratic People’s Party/Social Democratic Party (PPD/PSD)’s leader, opposed these measures and strongly advocated for calling for international financial assistance (see question X.1). On 24 March, Germany regretted that the austerity measures package was not adopted; it was the Euro’s stability that was at stake. Portuguese bonds recorded high after resignation: interest rates went from 7% to 14%. The political void and the financial situation left no alternative but to seek assistance from the European Financial Stability Facility (EFSF), the Eurozone’s bail-out fund.

On 5 June PPD-PSD won the elections and formed a coalition with the People’s Party (CDS-PP), a centre-right party. The MoU was negotiated before the elections with little public discussion (see question X.3).

The governing coalition came close to collapse in mid-2013 after the minister of finance, Vítor Gaspar, resigned on 1 July. In his resignation letter, Vítor Gaspar stated that his credibility had been undermined by rulings by the constitutional court overturning government policies in October 2012 and in April 2013. He also suggested that his increasing isolation within the cabinet over the implementation of Portugal’s EU/IMF austerity programme contributed to his resignation, adding that his departure would reinforce “the cohesion of the government”.[2] Vítor Gaspar had been seen as inflexible by the Popular Party (CDS-PP), and parts of the dominant Social Democratic Party (PSD), particularly in response to calls for lower taxes and other measures to support investment and economic growth.[3]

Minister or Foreign Affairs, Paulo Portas (CDS-PP leader), resigned from the government immediately after Vítor Gaspar was replaced by his deputy, Maria Luis Albuquerque. Paulo Portas stated that the prime minister had chosen the “path of continuity”, a decision he did not support. The prime minister did not accept his resignation and political instability sent interest rates on government debt soaring.[4]

On 21 July, Portugal’s president, Aníbal Cavaco Silva, announced that the current government should remain in office until the end of its term (2015). Paulo Portas reintegrated government as Deputy Prime Minister.[5] The decision followed the failure of negotiations between the three main political parties (PSD, CDS-PP and PS) to agree on a broader parliamentary consensus over the steps necessary to complete the country’s EU/IMF programme.[6]

Portugal made a clean exit from its EU/IMF bailout in May 2014.[7]

[1] Socratic Method, 1 October 2009, The Economist at http://www.economist.com/node/14560974#.

[2] Full resignation letter can be read in http://expresso.sapo.pt/carta-de-demissao-de-vitor-gaspar=f817482.

[3] For more details see Country report, the economist intelligence unit, available at http://country.eiu.com/article.aspx?articleid=1570676341&Country=Portugal&topic=Politics&subtopic=Forecast&subsubtopic=Political+stability&u=1&pid=762217060&oid=762217060&uid=1

[4] For more details see Country report, the economist intelligence unit, available at http://country.eiu.com/article.aspx?articleid=2020682386&Country=Portugal&topic=Politics&subtopic=Forecast&subsubtopic=Political+stability&u=1&pid=762217060&oid=762217060&uid=1

[5]Seeking to Repair a Rift in Portugal’s Ruling Coalition”, 6 July 2013, available at http://www.nytimes.com/2013/07/07/world/europe/seeking-to-repair-a-rift-in-portugals-ruling-coalition.html

[6] The Economist Intelligence Unit, Portugal, available at http://country.eiu.com/article.aspx?articleid=980757082&Country=Portugal&topic=Politics&subtopic=Forecast&subsubtopic=Political+stability&u=1&pid=762217060&oid=762217060&uid=1

[7] The Economist Intelligence Unit, Portugal, http://country.eiu.com/portugal; “Portugal bank knocks recovery”, 10 August, The Financial Times