Portugal’s Passos Coelho Clings to Power After Ministers Resign

The conservative premier is confident that he can stave off new elections even after two of his ministers stepped down.

Portuguese prime minister Pedro Passos Coelho in Brussels, November 22, 2012
Portuguese prime minister Pedro Passos Coelho in Brussels, November 22, 2012 (The Council of the European Union)

Portugal’s prime minister Pedro Passos Coelho said on Wednesday that he was “confident” he could remain in power despite the resignation of two of his ministers and the possible withdrawal of a party from his coalition.

“I hope this internal crisis can be overcome very quickly,” Passos Coelho told reporters in Germany’s capital Berlin where he was attending a summit of European leaders about youth unemployment.

The conservative premier’s political survival hinges on his junior coalition partner which, after hours of talks earlier in the day, hadn’t decided yet whether to continue to support the government.

The party’s leader, Paulo Portas, tendered his resignation as foreign minister on Tuesday which Passos Coelho refused to accept.

Portas’ Christian Democrats, who have 10 percent of the seats in parliament, formed a coalition with the liberal conservatives in June 2011 when the latter fell eight seats short of an outright majority in elections.

The political crisis was triggered by the resignation of finance minister Vítor Gaspar on Monday. An advocate of Portugal’s fiscal consolidation efforts, he argued that his credibility had been undermined by disappointing budget forecasts and the Constitutional Court overturning some of his reforms. The judges in April struck down pension and public-sector compensation cuts as well as planned reductions in unemployment benefits which should have achieved some €1 billion in deficit reduction.

Portugal’s deficit fell from nearly 10 percent of gross domestic product in 2010, when its economy contracted 3 percent, to 6.4 percent last year. In the first three months of this year, however, the shortfall had risen again to 7.1 percent of GDP.

Western Europe’s poorest economy was given one more year to meet its fiscal targets by its European Union creditors and the International Monetary Fund in March. In early 2011, the bodies pledged €78 billion in financial support to Portugal. It was the third country after Greece and Ireland to require a bailout to stay afloat.

Under the creditors’ most optimistic scenario, Portugal’s debt is expected to peak at 124 percent of GDP next year. In 2009, when the crisis began there, it stood at 70 percent of economic output.

Passos Coelho hopes to stave off early elections which could see the Socialists return to power. They had a 12 percent point lead over the ruling party in a recent survey.

Although the left initially supported economic and fiscal reforms, it has become increasingly critical of austerity measures as popular resistance also mounted. It is unclear if the Socialists would stick with the reform program if they are elected which could jeopardize Portugal’s international financial support.

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