Cause and Effect in European Politics and Law

Center-right parties have won the early elections in Portugal

Ralitsa Kovacheva, June 7, 2011

The Social Democrats have won the early parliamentary elections in Portugal with 39% of the votes, or 105 seats. Most likely they will form a coalition with the third parliamentary force - the People's Party (Member of the European People’s Party), which received nearly 12% of the votes or 24 seats. The Socialist Party of caretaker Prime Minister Jose Socrates has received 28 percent and 73 mandates, which is 10 percent and 24 seats less than the party's outcome in the previous election in 2009.

Such a denouement was not a surprise since the government was forced to resign because of parliament's refusal to support the austerity measures package (forth in a year) proposed by the cabinet. Despite the arguments of the government that this was the only way the country to avoid a rescue loan from the EU and the IMF, the package was not approved and Lisbon asked for external financial assistance after all. One of the conditions of the Troika (the European Commission, the ECB and the IMF) was the economic programme in support of the 78 billion euro loan to be agreed by all major political parties to ensure that the agreement will be respected regardless of who wins the elections.

Jose Socrates took the responsibility for the loss and resigned as party leader. “This defeat is entirely mine and I want to assume full responsibility for it,” Socrates said, quoted by the BBC. “I feel it is necessary to open a new political cycle that is able to prepare a consistent alternative. I want to give the Socialist Party the space to discuss its future and select a new leadership.”

The leader of the Social Democrats (PSD) Pedro Passos Coelho, who will most likely be the next Portuguese prime minister, conveyed an eloquent message: “I want to guarantee to those who are watching us from abroad that Portugal does not intend to be a burden for the future to other countries that lent us the means that we needed today to face up to our responsibilities”.

Despite the categorical election result, the blame for the difficult economic situation of the country can hardly be cast only on the Socialists, who ruled Portugal in the last 6 years. Before that, however, they traditionally alternated in power with the Social Democrats and both parties were major parliamentary forces. The turnout, which is a little less than 60%, is not so dramatically low, were the first comments - according to the statistics, in recent years the turnout has been diminishing, but was around 60 percent average.

Now the new government should implement measures similar to those opposed by Parliament a few months earlier. Despite the efforts of the previous government, the budget deficit is 8.6% of GDP (last year it was 9.1 percent). The level of public debt is 83% and the unemployment is over 12 percent. Under the agreement with the EU and the IMF, the country will have to reduce its budget deficit to 5.9 percent this year, 4.5 percent in 2012 and 3% in 2013. The public debt is expected to stabilise in 2013. However, according to the parameters set in the programme, the country will sink into a two-year recession, the economy will contract by 2 percent in 2011 and 2012 and a recovery of the economic activity is foreseen as far as in 2013.

Analysts commented that the electoral victory of the center-right forces would inspire confidence in the markets and this would ease the interest pressure on Portugal. They predict a greater chance of this happening, than in Greece, where all measures to restore the image of the country to the financial markets have failed. Currently, a new rescue loan is being prepared for Athens, which has been agreed in principle, but the exact amount and conditions of the loan are expected to become clear on June 20.