Portuguese political crisis deepens

Portugal’s main opposition Socialist Party (PS) has rejected a call for a national coalition by President Aníbal Cavaco Silva, without first holding elections.

The Socialists said they would “not support, much less become a part of, any government solution coming from the current parliamentary make-up.” The political tensions were palpable in the sovereign debt market where the yield on the benchmark 10-year government bond on Friday moved toward eight percent.

To resolve the crisis created by the resignation of Foreign Minister Paulo Portas, Cavaco Silva is proposing a pact among Portugal’s three majority parties — the center-right Social Democrats (PSD), the Christian Democrats (CDS-PP), both of which rule in coalition, and the opposition Socialists. The head of state has defined this project as a “commitment to national salvation.”

Cavaco Silva would like this national salvation government to focus on meeting the requirements of the country’s bailout program; hence his suggestion to postpone elections until after June 2014, when the troika — the International Monetary Fund (IMF), the European Central Bank and the European Commission, which together set out the bailout conditions and check on progress — leaves the country.

The political crisis that opened up on July 2 with Portas’ resignation has already delayed the next bailout evaluation, which should have begun on Monday. The Finance Ministry said the EU and the IMF have agreed to postpone this test for a month and a half.

The Socialists, which were in power when Portugal accepted the bailout in May 2011, now want to renegotiate their terms and reject the new austerity measures aimed at saving 4.7 billion euros.

Cavaco Silva met with party leaders on Thursday to drum up support for his plan. Prime Minister Pedro Passos Coelho “expressed complete commitment to an agreement on the grounds described by the president,” said an official source in the prime minister’s office. The Christian Democrat Nuno Magalhães also said his party was open to dialogue. But Socialist secretary general António José Seguro held back his support, saying that elections should be held first and that the pact should encompass all political parties, not just the three main ones.

The president has downplayed the importance of calling citizens to the polls early. “With elections now, the sacrifices made by citizens would be in vain,” said Cavaco Silva in his 20-minute televised address.

But there is more to his national salvation pact than meets the eye. Cavaco Silva’s proposal, which specifically includes the opposition in a coalition government, is an indirect way of rejecting the new Social Democrat-Christian Democrat coalition that has emerged following the foreign minister’s resignation and the subsequent renegotiations by the two parties in power.

The result of this new deal was that Paulo Portas would go back on his “irrevocable” resignation, remain in government, and be appointed head of economic policy, which in Portugal means just about everything these days. But with Cavaco Silva’s veiled refusal to accept this deal, uncertainty reigns again.

“Do we have a government?” wondered one political analyst on Friday. Nobody dares make any forecasts about what might happen next, given the ability of Portuguese politics to come up with surprising new twists.