Analysis: ‘A guide to the coalition government’s health’, by PDV editor Vítor Matos

The coalition is not in good health, but the government runs little risk of collapsing as long as Portugal is under the troika’s control. On the other hand, the Socialist Party has little to gain if it became government at this stage.

What's New — 06 June 2013 by Vitor Matos
Analysis: ‘A guide to the coalition government’s health’, by PDV editor Vítor Matos
What are the government’s main internal conflicts?

Paulo Portas, leader of the junior coalition partner CDS-PP (Conservatives), and Minister of State and Foreign Affairs, has been on a public collision course with Prime Minister Passos Coelho (leader of the centre-right PSD party) and especially with Minister of Finance Vítor Gaspar. Tension reached a first peak in September 2012, when Paulo Portas prevented the government from going ahead with a reduction in the so-called Single Social Tax (company-paid social security contributions). The measure was defended by the troika and was included in the first memorandum of understanding. In September, the government had decided to reduce these contributions for companies, compensating this decrease by increasing the contributions of employees.

The plan was to reduce company-paid contributions by 5.75% while raising those of employees by 7%, meaning both would end up paying 18% of the value of each gross salary. The measure was dropped after a dramatic public address by the CDS-PP leader, in which he hinted that the only reason he had not ended the coalition was due to responsibility: “I won’t lead the country into an irresponsible political crisis, nor will I strip the CDS of its identity,” he said. The government’s backtracking was not only due to Portas: the measure was also strongly criticised by trade unions, employers and one of the biggest demonstrations ever took off on the streets.

The most recent crisis, which unravelled in early May, had to do with the need to find €4.8bn in permanent cuts to state expenditure – while at the same time compensate for the rejection by the Constitutional Court of several measures included in the 2013 state budget worth €1.3bn. To generate around €430m a year, Passos Coelho and Vítor Gaspar suggested creating a surcharge for retirement pensions. Pedro Passos Coelho announced the measures on a Friday through an official statement. Two days later, Paulo Portas read a thirty minute speech from the CDS-PP headquarters, in which he levelled criticism at his own government. He referred to the troika as “those gentlemen” and declared himself “politically incompatible” with the measure, while adding that he would never cross that political boundary.

However, a week later the surcharge on pensions appeared in the report of the troika’s seventh quarterly assessment. Vítor Gaspar did not take much notice of Portas during the negotiations with the lenders and the fault line became more pronounced. In terms of official discourse, the measure will only go ahead now if deemed absolutely necessary. On 29 May, in parliament, Portas highlighted once again that he will try to avoid its implementation.

The government is not homogeneous and this is not the only source of divisions: the CDS-PP has three ministers out of 11 (including Paulo Portas), who are naturally aligned with their leader. In many cases, the PSD ministers, such as Miguel Macedo (internal administration), Paula Teixeira da Cruz (justice), and José Pedro Aguiar-Branco (defence), have been against the measures defended by Passos Coelho and Vítor Gaspar and have been critical during the Council of Ministers meetings.

Do the internal tensions between both coalition parties mean that the government will be collapsing soon?

No, at least not until June 2014, which is when the Portuguese adjustment programme ends. The big difference is that Pedro Passos Coelho has already stopped fighting for a victory in the next general election. He knows the party will lose the local elections of 22 September 2013 and that holding on to power is a mirage. A poll this week by newspaper i revealed that 25% of its readers would vote for the PSD (which had 39% of votes in 2011), and 33% would vote for the Socialist Party. On the other hand, Paulo Portas, who is a political survivor, knows that both his future and the future of his party depend on maintaining an acceptable result: 12% voted for his party in 2011 and in the same poll 9.5% said they would vote for him. To lose votes among pensioners could be a disaster for the CDS-PP.

For that same reason, Paulo Portas will never end the coalition: for years his strategy has consisted of appearing as the credible partner to moderate the majority party; if he was responsible for a political crisis which plunged the country into a the disaster of a second bailout, his political career would end in disgrace and the relevance of the CDS could disappear. In the CDS, to justify their disagreements, the leaders have been repeating ad nauseam that in other countries, differences within coalitions are normal.

Carrying out this trial of strenght in public against the prime minister, highlighting that Passos Coelho will go ahead with measures despite the CDS’s opposition, are a capital that Portas will use in the future. It is not difficult to guess that he is collecting cases to present to the electorate. Rather than selling himself as a minister for foreign affairs, who is always enviably popular, Portas will try to sell himself to the Portuguese as a “preventer” of the measures that will penalise the people and the economy such as the Social Single Tax and the surcharge on pensions.

Nonetheless, the possibility of early elections will increase when the troika exits Portugal. It will all depend on the state of urgency the country is in, as well as on European politics and market conditions.

Can the president lose his patience regarding these internal divisions expressed in public, and dissolve the government invoking the irregular functioning of the institutions?

It is very unlikely that President Aníbal Cavaco Silva will ask the government to step down or dissolve the parliament on his own initiative. Cavaco is an institutionalist who has always been obsessed with political stability and a professor of economics who knows the risks Portugal would face now if there is a political crisis. It was him who supposedly moderated the disagreements surrounding the issue of pensions.

During the last Council of State in May – the advisory body of the president, which gathers the regime’s main “senators” – some advisors considered the hypothesis of early elections, but that information was not disclosed in the final statement released to the press. The meeting lasted over 7 hours and according to press reports, was very tense.

Cavaco, who was leader of the PSD and prime minister between 1985 and 1995, had Passos Coelho as head of the party’s youth wing, but they never had a very peaceful relationship. Paulo Portas, on the other hand, was one of his worst enemies in the 1990s: the current minister was then editor of the Independente, a right-wing newspaper whose favourite target was the scandals involving figures from Cavaco’s government. Editorials by Paulo Portas against Cavaco and his ministers were corrosive but, nonetheless, today they seem almost in sync regarding many political issues.

Does the Socialist Party really want to topple the government right away as expressed in its official discourse?

It might appear so, but António José Seguro, secretary general of the Socialist Party, would have little to gain if he took office now. In the case of early elections, a second bailout would be highly probable, and he would therefore be compelled to apply even harsher measures than those he has criticised. Seguro’s stance can be interpreted as scheming: he radicalises his speech against the troika as it is unlikely he will become prime minister during their presence in the country. It is a way of gaining space in this critical phase, to later be able to position himself with greater freedom in a future government, eventually without the present ties to the international creditors. At the same time that he strongly criticises the adjustment programme, he also guarantees that he will meet the targets agreed with Europe.

Last week, a meeting between left-wing parties took place, co-sponsored by elder statesman and former President Mário Soares. The meeting included the Portuguese Communist Party (PCP), the Left Bloc (BE) and the Socialist Party (PS), but Seguro did not attend.

Indeed, the leader of the PS needs to maintain some room for manoeuvre for eventual future government coalitions: as there is complete incompatibility regarding governing policies with the PCP and the BE, he can only count on a possible coalition with the right, with the CDS or the PSD. It would not be the first time: the Socialist Party was in coalition with the CDS in 1978-79 and with the PSD between 1983-85, curiously, during the International Monetary Fund’s first two interventions in Portugal.

Photo: Minister of State and Foreign Affairs Paulo Portas by LUSA/All Rights Reserved

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