Portugal centre-right to face bailout test after vote win

Portugal’s centre-right Social Democrats on Monday faced the challenge of implementing a 78-billion-euro bailout programme after they ousted the ruling Socialists in a snap election.

The party took 38.6 percent of the vote in Sunday’s polls to secure 105 seats in the 230-seat legislature, after only the results of votes cast abroad, which select four seats in parliament, were left to count.

The result falls short of a majority but the leader of the Social Democrats (PSD), Pedro Passos Coelho, said he would immediately seek to form a coalition government with the smaller, conservative CDS-PP “that will provide stability during the next four years”.

The CDS-PP won 24 seats and together with the PSD the two parties would have an absolute majority in parliament of 129 seats. They last governed together in a coalition between 2002 and 2005.

“Landslide PSD victory returns power to right,” headlined daily newspaper Jornal de Noticias on Monday.

Passos Coelho, 46, vowed “to do everything possible” to honour the conditions attached to the bailout agreement reached last month between Lisbon and the International Monetary Fund and the European Union.

“I want to guarantee to those who are watching us from abroad that Portugal does not intend to be a burden in the future to other countries that lent us the means that we needed today to face up to our responsibilities,” he added during a somber victory address.

The bailout deal imposes tight deadlines to impose deep spending cuts and wide-reaching economic reforms.

Among the measures called for in the three-year bailout deal are tax hikes, a freeze on state pensions and salaries and a reduction in jobless benefits as well as their duration.

Passos Coelho campaigned on a promise to “go beyond” the measures set out in the agreement.

He wants to add more companies to the list of state firms to be sold under the bailout deal, such as the state water utility and the Lisbon metro.

The PSD leader also wants to require people collecting jobless or welfare benefits to do community work to “facilitate” their return to the labour market.

The new government will have to implement the bailout programme at a time of record unemployment and declining growth.

Portugal’s jobless rate stood at 12.6 percent in April, one of the highest levels in the euro zone, while the economy is expected to contract by about two percent this year and the next.

Speaking before the election, former PSD leader Fernando Nogueira warned that Portugal could be forced to leave the euro if the party was elected and it failed to implement the bailout programme.

“If we govern badly we risk having to leave the euro. And that would have dramatic consequences for the Portuguese people,” the former justice and defence minister said at a final PSD rally late on Friday in Lisbon.

Outgoing prime minister Jose Socrates, in power since 2005, resigned as leader of the Socialists before the final official results were in, saying he wanted to give the party the space to “select a new leadership”.

“This defeat is entirely mine and I want to assume full responsibility for it,” the 53-year-old said in an address to party supporters in Lisbon.

The Socialists captured 28 percent of the vote, their lowest percentage of the ballots since elections in 1987, giving them just 73 seats in parliament.

The early election was triggered by Socrates’s resignation at the end of March after the parliamentary opposition, led by the PSD, rejected his minority government’s fourth austerity package in just under a year.

Two weeks later Portugal became the third eurozone nation after Greece and Ireland to request an international bailout.

Socrates argues he did everything to avoid a bailout.

He blames the PSD, which had backed previous fiscal tightening, for provoking a political crisis that worsened the country’s debt crisis just to topple the government “out of a greed for power.”