Portuguese PM confident of re-election despite troika austerity

Tomorrow Pedro Passos Coelho will attempt to become the first prime minister of a bailed out euro-zone country to gain re-election.

The conservative Passos Coelho (51), who leads the Social Democratic Party (PSD), has governed Portugal since 2011 in a centre-right coalition.

Early in the campaign, the opposition Socialist Party appeared to be pulling ahead in polls. But the prime minister and his coalition have fought back, going into the general election with a four-point lead over the Socialists, according to a poll published yesterday by Público newspaper.

Programme of austerity

That is despite the fact that the government has overseen a severe programme of troika-sponsored austerity.

“I have a lot of faith in people,” Passos Coelho said, when asked this week if he believed the election result would see him continue as prime minister. He showed journalists a crucifix he had been given days earlier by a worker on the campaign trail, saying it reflected voters’ confidence in him. “I think we always have the opportunity to take the right decisions. Sometimes we take the wrong decisions and when it’s possible to correct them . . . we should do so,” he said.

The last four years have been full of difficult decisions for Passos Coelho.

He took power soon after the country had embarked on a €78 billion EU rescue package. Pledging to "go beyond the troika" in order to restore market confidence in Portugal, he implemented the conditions of the deal with zeal, hiking taxes, cutting pensions and freezing salaries. The measures kept Portugal mired in recession for 2½ years and were deeply unpopular, spawning one civic protest movement which called itself Que se lixe a Troika (or "Screw the troika").

New tax

In 2012, thousands took to the streets after the government had unveiled a new social security tax that lowered the rate for companies and raised the contribution for workers. Passos Coelho eventually withdrew the reform.

But now the Portuguese economy appears to be back on track. The public deficit, which was at 10 per cent of GDP in 2010, is expected to come in below 3 per cent this year; unemployment has fallen from a high of nearly 18 per cent to just over 12 per cent; and the economy is now growing faster than many other euro zone countries.

"We've spent four years talking about finances and the economy and now everything is in order we can put the dignity back into politics," Passos Coelho said this week, while visiting the university town of Coimbra.

António Costa Pinto, of Lisbon University’s Institute of Social Science, believes the prime minister is successfully selling the idea that the pain was worth it.

“The basic message from the right is: ‘We did all this austerity but we are recovering and so giving the Socialists a victory might take us back to a past we don’t want’,” he said. “Apparently that is convincing people in the political centre.”

While this government took power in the most demanding economic circumstances, the political situation has favoured it. Despite the street demonstrations, Portugal has not seen the kind of anti-austerity groundswell that made Syriza and Podemos major forces in Greece and Spain, respectively.

The Communist Party, which opposes the troika’s recommendations, is polling at under 10 per cent, while the Leftist Bloc (BE) is in fourth place. A crowded political left seems to be hurting the Socialists.

The Socialist candidate, António Costa (54), has promised to ease austerity, but without letting Portugal slide back into the financial chaos of 2010-11.

"This right-wing coalition has permanently divided the Portuguese and it has tried to pit us against each other," Costa told supporters in the Azores this week. He added that Passos Coelho's government "wants to fuel this idea that defending the pensions of today's pensioners means sacrificing the future for younger generations".

But the Socialists’ campaign has been hindered by the shadow of their former leader, José Sócrates, who was prime minister from 2005 until 2011. He was arrested in November 2014 in connection with an investigation into corruption, money laundering and tax fraud and spent 10 months in prison, before being put under house arrest just as the campaign was getting under way last month. Sócrates insists his arrest was politically motivated.

Former boss

Costa was a minister in the Sócrates government, which signed off on the original bailout deal in 2011, and he has struggled to shake off the association with his former boss.

In a televised debate between the two contenders, Passos Coelho referred to the housebound Sócrates 12 times, knowing the link would hurt his rival.

Whatever the outcome of this weekend’s election, it is likely that the winner will not hold a majority in the 230-seat parliament, making the implementation of reforms difficult.