Campaigning for Portugal’s June 5 general election has exposed sharp differences between the two main political parties over how the next government should implement the country’s €78bn bail-out deal.
Both the Socialists of José Sócrates, caretaker prime minister, and the centre-right Social Democrats (PSD), the main opposition party, have signed up to a package due to be approved today by the European Union and the International Monetary Fund.
But divergences over how to achieve the targets set out in the three-year programme of tough austerity measures and economic reforms have raised concerns over how successfully and at what pace they will be carried out.
In a hard-fought campaign, with the two main parties virtually level in opinion polls, Mr Sócrates accused the PSD of using the EU-IMF deal as a pretext for proposing “the most radical rightwing programme ever put forward” in Portugal.
PSD plans to privatise state broadcasters, transport companies, financial institutions and water utilities and to “open state education and healthcare to private enterprise” went far beyond the bail-out agreement, said Mr Sócrates.
A PSD victory would put “social justice and equality of opportunity at risk”, he said at the weekend.
But Pedro Passos Coelho, PSD leader, said his election manifesto intentionally went “further and deeper” than the EU-IMF package in an effort to lift Portugal out of “the cycle of poverty” created by six years of socialist government.
Mr Sócrates’s election programme was based on the same policies that had brought the country to “the brink of bankruptcy”, he told PSD supporters in the Azores islands at the weekend.
Policy disagreements over painful deficit-reduction measures have been intensified by the latest EU economic forecasts. Portugal is the only European country projected to be in recession in 2012, with unemployment reaching a record 13 per cent and public debt exceeding 100 per cent of gross domestic product for the first time.
According to José Pacheco Pereira, a historian and senior figure in the PSD, the Socialists plan to “sidestep, postpone, evade and, in some circumstances, simply not apply” the bail-out deal.
Voters who wanted to “resist [the EU-IMF programme] and who believe that is possible” would vote Socialist, he wrote in a newspaper column.
Those who understood that it would have a “remedial impact on the role of state” and was, “in effect, Portugal’s last chance” would support the PSD.
Concerns over how effectively the next government will execute the bail-out agreement have been heightened by opinion polls suggesting that neither the PSD nor the Socialists would gain a clear majority in the election. Most polls give the Socialists a lead of 2-3 percentage points over the PSD, but the difference is within the margin of statistical error.
Mr Passos Coelho has ruled out serving in a government coalition with the Socialists. But the polls indicate his that preferred coalition with the small conservative Popular party would not command an overall majority in parliament.
Political analysts fear that attempts to form a majority coalition government after a close election result would involve protracted negotiations, possibly resulting in an impasse or another weak minority administration.
Mr Sócrates’s own minority government was defeated in parliament in March, triggering the political crisis that he says forced Portugal to ask for a bail-out.
Copyright
The Financial Times Limited 2011
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