Pandemic exposes cracks in Portugal’s left-wing pact

Portugal’s special brand of socialism, sometimes called “the fourth way”, appears to be running out of road.

As the second wave of the coronavirus pandemic batters Europe, tensions over balancing social spending and fiscal prudence are pulling apart the left-wing pact that has kept the minority Socialist Party (PS) government of prime minister António Costa in power since 2015.

In recent weeks, the anti-capitalist Left Bloc (BE) and the hardline Communist Party (PCP) have spurned the PS by voting with right-of-centre opposition parties to defeat the government in important parliamentary votes on public spending.

These so-called negative coalitions have led Luís Marques Mendes, a political commentator and former leader of the centre-right Social Democrats (PSD), the main opposition party, to warn of “a perfect storm” of “ungovernability”.

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Costa, whose "historic compromise" with the radical left has been emulated in neighbouring Spain and followed with interest by centre-left politicians across Europe, berates the BE for lacking the "political maturity" to support unpopular measures needed at a time of crisis.

Catarina Martins, the BE leader, told parliament, however, that the government was acting "as if the second wave of the pandemic didn't exist". Despite being one of the European countries hit hardest, she said, "Portugal is also, tragically, one of those spending the least as a percentage of national output on responding to the crisis".

Costa secured office in late 2015 by forging an unprecedented alliance with the BE and PCP after an indecisive election that the PS lost to the centre-right. Putting aside deep ideological divisions, the parties united under the banner of rolling back austerity measures imposed by the EU and IMF during the European debt crisis.

Odd contraption

After the PS was re-elected in October 2019 with a bigger share of the vote, but still lacking an absolute majority, efforts to renew the left-wing pact by means of a second written agreement failed. They sought instead to continue the alliance informally, with Costa saying it would “impoverish democracy” if he sought allies on the right.

Since the pandemic hit in March, however, Portugal’s health and economic crises have exposed rifts within the pact to the point where even its disparaging sobriquet of geringonça, meaning “odd contraption”, seems flattering.

“The common ground shared by the BE and the PS narrowed after the ‘reversing austerity’ agenda was exhausted during the government’s first term,” said Ana Luís Andrade, a Europe analyst at the Economist Intelligence Unit. “The BE’s current focus is on increasing public investment and social protection, while Mr Costa continues to prioritise fiscal prudence. They are also at odds over labour market reform.”

Tensions came to a head in late November when, for the first time, the BE voted against a budget proposed by Costa. The prime minister averted defeat by striking a deal with the PCP, which agreed to abstain in return for a package of social measures, including more spending on doctors, nurses and intensive care beds. As a result, the 2021 budget passed by just three votes.

The vote exposed the degree to which government policymaking is dependent on painstaking negotiations with radical left-wing partners and subject to defeat by ad hoc parliamentary coalitions. In all, 82 amendments were passed against the government’s will.

Good bank

Most grievously for Costa, opposition parties on the right united with the BE and PCP to inflict an embarrassing defeat on the government by vetoing a planned capital injection of up to €474 million for Novo Banco, the so-called good bank rescued from the collapse of Banco Espírito Santo in 2014.

The defeat forced Costa to reassure European officials and international investors that Portugal would honour its commitment to the struggling lender, which is controlled by a US fund. The government is taking court action to overturn the veto.

"Every political and economic decision on which the government hopes to legislate is now an opportunity for parties on the left and right to demarcate positions and seek advantage ahead of the next election," said Paula do Espírito Santo, a political-science professor at the University of Lisbon.

The next parliamentary election is scheduled for late 2023, but Espírito Santo thinks it could be called early. According to a senior opposition politician, who asked not to be identified, local elections next October could become the trigger,

In the meantime, says Isabel David, who teaches politics at the University of Lisbon, the pandemic, a presidential election in January and Portugal's presidency of the EU during the first six months of next year rule out any likelihood of a political crisis over the near term.

“The BE knew it could afford to reject the 2021 budget because Costa isn’t in a position to call a snap election,” said Andrade. “A government collapse during the EU presidency would severely damage Portugal’s external credibility. Essentially, the BE decided to call Mr Costa’s bluff, and it might continue to do so.” – Copyright The Financial Times Limited 2020