Portugal’s President Suggests Early Elections, Deepens Political Crisis

Rather than supporting a cabinet reshuffle, Aníbal Cavaco Silva urges a broader political agreement.

President Aníbal Cavaco Silva urged Portugal’s ruling parties and the opposition Socialists to agree to economic adjustments that are necessary under the country’s European bailout in a television address on Wednesday, raising the prospect of early elections once they have successfully weaned Portugal off international financial aid.

Cavaco Silva was expected to signal support for a cabinet reshuffle that kept Prime Minister Pedro Passos Coelho’s government in office last week, after the junior coalition party had threatened to pull out. Instead, he implored the three major parties to respect the conditions of the country’s bailout program and suggested there could be elections after Portugal is scheduled to exit the bailout in June of next year.

“The commitment must involve the three parties, all of which signed the bailout deal, to support measures for Portugal to return to the markets in early 2014 and complete the adjustment program,” the president said.

While the presidency is mostly a ceremonial function, Cavaco Silva, who comes from the same party as Passos Coelho, can dissolve parliament, triggering new elections.

Poll suggest the Socialists should welcome early elections. While they initially supported economic and fiscal reforms, they have become increasingly critical of austerity measures as popular resistance also mounted.

Passos Coelho, who came to power two years ago, managed to salvage his coalition after both the finance and foreign ministers tendered their resignations last week. He offered the leader of his conservatives, who command 10 percent of the seats in parliament, the deputy prime ministership and more influence in economic policymaking to placate their concerns about a widening budget deficit and rising unemployment.

In March, Portugal’s European lenders, who promised €78 billion in financial support in early 2011 to keep the nation afloat, gave it one more year to rein in its shortfall which rose to 7.1 percent of economic output in the first three months of this year. The economy is expected to contract 2.3 percent this year, however, complicating the fiscal consolidation effort, while unemployment, which hit a record 16.9 percent in 2012, might climb to 18.2 percent.