(Dis)Integration of Bosnia and Herzegovina in the European Union
Eight years later: Is Croatia finally truly ready for Europe?
Greece's EU journey: Solidarity hard to come by, but two-way approach also lacking
Some sad lessons the Western Balkans can learn from Bulgaria's EU Journey
Running the wrong way: Rama's spat with the EU over vaccination underlines growing frustration
Somewhere in the middle: Kosovo's delicate relations with the European Union
Portuguese election: Where those who lost may decide
Anyone who might have listened the European Commission statement in the aftermath of the Portuguese general election, saying that the result “confirms the will of the Portuguese people majority to pursue the path of reforms,” may have got the impression that everything will continue exactly the same.
In fact, that may well happen. Or maybe not? The first change we should acknowledge is that it will probably be those who lost that will clear up this uncertainty rather than the election winners.
But, first, to fully understand the potential changes ahead, there are several questions to be answered.
How was it possible?
The pro-austerity coalition PSD-CDS has won 104 out of 230 seats. Undoubtedly, it is quite an achievement for these parties, after 30 billion euros of austerity measures since 2011. How was it possible?
Certainly, the fact that Portugal managed to follow Ireland’s steps last year and made a “clean exit” from the bailout may help to explain it. Moreover, economic activity has gradually started to recover (0.9 percent growth in 2014, after three years of recession, and the prospect of 1.5 percent growth this year); the country also reached a positive external balance for three years in a row after 18 years of deficit; the annual unemployment rate suddenly dropped sharply, from 16.2 percent in 2013 to 13.9 in 2014 (and this year the monthly unemployment rate in August was 12.4 percent); finally, the government insists that it is possible to reach a deficit below 3 percent of GDP this year.
These numbers were repeated over and over again, some of them driving the coalition election campaign, which was based on a very simple idea that, step by step (but not without effort) Portugal will reshape its economy and the Portuguese people will recover their incomes.
Are these big numbers telling the whole story?
No, they’re not. These figures mask some pertinent information. Surely, the Portuguese government could show some gratitude to Ireland and European Central Bank president Mario Draghi for their help in the bailout exit; the economic growth is also being fueled by low oil prices; and the positive external balance was achieved through a strong reduction of private demand (which is now mounting again).
Also, the unemployment rate hides widespread use of internship programs, a huge increase in discouraged workers, much more precarious work and the emigration waves (official estimates indicate that almost 500,000 Portuguese have left the country in 4 years, 200,000 of them permanently). There is some employment being created but not as much as unemployment is falling. For example, this year, in August, 67,000 people were no longer unemployed, comparing to the same month of last year, but the employed population has only increased by 5,000 in the same period.
Also, according to its most recent estimates, the IMF believes that the unemployment rate in Portugal will drop this year almost 1 point compared to April estimates, although growth is kept unchanged at 1.5 percent. Is job creation without growth possible?
Concerning the budget deficit, there is, for now, some scepticism among two independent national bodies (CFP and UTAO) about the real chances for the government to reach 2.7 percent of GDP this year.
So, were the economic figures, and the way they were used, the main drivers of the coalition's victory?
Maybe. But the Socialist Party (PS) played its role in the defeat (although gaining 12 seats, taking its total to 85). For a start, the socialists were in power when troika arrived in Lisbon. Secondly, their leader, António Costa, requested a very detailed anti-austerity economic programme from a group of respectable economists, which should have been a valuable asset for his party but turned into a trap.
Costa spent most of his time trying to explain flaws and doubts about the complex programme, whereas the government did not present a real programme at all (simply holding on to a couple of promises of returning gradually some of the cuts in the next 4 years). Several political analysts also point out other mistakes, including a “radicalisation” of Costa’s rhetoric, which was used by the coalition as alleged proof that PS is now a radical party that would destabilise the country.
Ok, but what about the austerity?
Yes, it was painful and still is for many Portuguese, but the troika program had front-loaded austerity measures. That means that almost two thirds of the additional effort since 2011 was made in the first two years, giving the perception now that “the worst has passed.”
Is this election a proof that Portuguese people back austerity measures?
The numbers speak for themselves. The coalition has won but it also lost the majority in Parliament. And, compared to the last election, it lost 800,000 votes (a 30 percent decrease). It is, therefore, a bittersweet victory: The anti-austerity parties collected 62 percent of the votes.
However, the different parties on the left (Socialist Party, Left Bloc and Communist Party) have important differences and haven’t managed yet to build bridges with each other.
The Socialist Party, representing the centre-left, has proposed an economic package to stimulate growth through private consumption and promising to end some of the most painful austerity measures in two years. And, although António Costa recognizes that Portugal must comply with the budget rules, he stands against the Budgetary Treaties.
The Communist Party (PCP, 17 seats) would not have any problem leave the euro, while the Left Bloc (Bloco de Esquerda, 19 seats) also toys with the idea of leaving the euro (but as a Plan B) if Europe doesn’t accept Portuguese debt restructuring. Left Bloc, a close ally of SYRIZA, moderated its tone in the election campaign (a way to survive) and even considered the idea of forming a coalition with the Socialist Party after the election. It set out three pre-conditions to any dialogue taking place with the socialists but PS has not answered... yet.
So, the Left Bloc has surprisingly doubled its support from 2011, most probably stealing votes from the socialists. It is now the third political force in the Parliament. Until quite recently, many predicted a collapse in the party. When SYRIZA came to power and Podemos gained momentum in Spain, several political analysts explained the absence of a similar movement in Portugal by the fact that the Left Bloc was already occupying this space and had lost its dynamism. With this election, Bloco de Esquerda is reborn from the ashes.
What happens now?
Since the coalition does not have a majority, Portuguese President Anibal Cavaco Silva has asked Pedro Passos Coelho (the prime minister and leader of the PSD-CDS coalition), to find a stable government solution, meaning some kind of agreement with the Socialist Party. But PCP and Bloco de Esquerda are putting pressure on the socialists to bring down the government at the first opportunity.
A lot seems to depend on António Costa. Is he going to allow the coalition to rule or will he wait for the right moment to trip it up? Also, will the PSD-CDS coalition try to force some austerity measures into the government programme or the 2016 budget in order to force new elections in April?
In his very ambiguous concession speech Costa admitted that he might eventually reject the coalition programme in Parliament if (and only if) there is an alternative stable solution: "Unfortunately, the majority that has expressed the will to change did not translate yet into a government majority.” “Yet” is the key word in this statement. The odds are against such a scenario, though, as the socialist leader rejects the idea of putting together “a negative majority that would only create obstacles, without assuring a real and credible alternative government". In any case, the next government cannot fall until April due to the presidential election taking place in January.
First, though, Costa, who took power last year in a very divisive process, is looking for survival. Starting from within his own party, which is showing already strong divisions. If he manages to maintain his leadership, his decisions in the coming days, weeks and months may be critical to end or deepen political uncertainty in Portugal.