Monday, 6 June 2011

Opposition wins Portugal election

Social Democrat leader vows to do "everything possible" to honour bailout commitments after defeating Socialists.

Outgoing Portuguese Prime Minister Jose Socrates conceded defeat and resigned as party leader [Reuters]

Portugal's centre-right Social Democrats (PSD) have won the country's general election, booting out Prime Minister Jose Socrates' Socialists after they sought a 78-billion-euro bailout that will bring deep austerity.

The PSD captured 38.6 per cent of Sunday's vote against 28 per cent for the Socialists, the interior ministry said after only the results of votes cast abroad were left to count.

Pedro Passos Coelho's PSD will be able to form a majority government with the smaller conservative CDS-PP party, which garnered 11.7 per cent of the vote.

In his victory speech, Passos Coelho vowed that Lisbon will do "everything possible" to honour its bailout commitments so as "not to be a burden" to its creditors.

"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," he said.

Outgoing Prime Minister Socrates quit the leadership of the Socialist Party after conceding defeat.

"This defeat is entirely mine and I want to assume full responsibility for it," he said in an address to party supporters in Lisbon.

"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."

Soaring unemployment

The election ends a period of political uncertainty that started with the collapse of the Socialist government in March and led Lisbon to become the third country in the euro zone to seek a bailout after Greece and Ireland.

The Portuguese, who face the highest level of unemployment in their country for three decades, had been expected to reject caretaker Prime Minister Socrates because of the dire state of the economy.

Many voters said they were disillusioned with politics. "Seeing the economic and political situation in the country I just don't believe any of the candidates. But not voting will make it even worse," Jose Evora, a retiree voting at the outskirts of Lisbon, said.

Ricardo, a voter in his late 20s, expressed a common view, that any new government will have to march to the beat of the lenders' drum.

"I think the election won't bring anything new because it's the IMF in charge of the country now ... Any party that gets to the government will just have to follow IMF rules," he said.

A centre-right government would be welcomed by investors, who have lost faith in the country in the past few months, dumping its bonds and sending borrowing rates to euro-era highs.

Austerity measures

Jose Manuel Barroso, the European Commission president who is Portuguese and voted in Lisbon, said the election was the most important since the turbulent ballots after the overthrow of the country's fascist dictatorship in April 1974.

"Given the economic and financial situation in the country, I consider this election the most important since the first ballots after April 25," he said.

A centre-right coalition government should be able quickly to enact reforms and austerity measures included in the bailout, such as sweeping tax rises and deep spending cuts, to reduce Portugal's large deficit and debt.

But the economy is expected to contract two per cent both this year and next, presenting the new government with tough challenges as disposable incomes fall and austerity takes its toll.

So far there have been few strikes or protests against the austerity, unlike in Greece and neighbouring Spain, but analysts say that could change as the recession deepens.