It would be a mistake to dismiss Portugal as a small economy on Europe’s southern periphery of little systemic consequence. The imminent rise to power of a Socialist government, dependent on the support of a far left anti-austerity bloc, could usher in a new phase of the European sovereign debt crisis. It could also draw attention to the process of political fragmentation across Europe over the past few years that shows no sign of losing momentum.
Portugal’s indecisive Oct. 4 election, in which no single party won an overall majority, is very likely to have ushered in a prolonged period of political uncertainty. After this weekend’s cementing of an alliance between the Socialists, the Left-Bloc, and the Communist Party, Aníbal Cavaco Silva, Portugal’s president, would seem to have little alternative but to allow that alliance to form Portugal’s new government should the current government of Pedro Passos Coelho lose this week’s scheduled confidence vote. Under the Portuguese constitution, Silva is precluded from calling a new election now since his term of office expires in January.
Judging by its agreed economic policy platform, a left-bloc government is likely to strongly resist Brussels’s call for further budget austerity. It is also more than likely to roll back a number of the economic reforms adopted by the previous government, including those regarding privatization policy and the minimum wage. This could pose a real risk to both domestic and international confidence in the Portuguese economy.
Full text of this article is available at TheHill.com.
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