A Second Carnation Revolution in Portugal?

“This is like the second April 25,” shouted a joyous woman outside the Assembly of the Republic referring to the downfall of the Portuguese dictatorship on that date in 1974. Yesterday afternoon the Portuguese left brought down the conservative government of Passos Coelho. Hundreds of demonstrators called by the CGTP union, with bands and banners, celebrated the historic political shift. From Greece, Syriza congratulated the new left majority; inside the Parliament, the possible future finance minister, Mário Centeno, reassured the markets and creditors that they “will comply with the budgetary treaty”. Centeno, educated at Harvard, will have to square accounts with a 20% rise in the minimum wage. “We have broken the taboo”, “the wall has fallen,” said the leader of the Socialists, António Costa, , in Parliament after the defeat of the conservative government. The agreement uniting the Portuguese Left has lifted a taboo that has existed since the 1975 Carnation Revolution that has divided the Socialists, the Communists and the radical left. Adapted from El País

The Spanish daily asserts, however, that the left still differs on economic policy and that the only really solid agreement between these forces is to vote against any motion of censure from the right-wing against the new left government.

The leader of the Left Bloc, Catarina Martins, has stated that the President of the Republic must respect this vote in which 123 left MPs, outvoted 107 right-wing representatives.

More: Catarina Martins diz que Cavaco tem de respeitar vontade da maioria dos portugueses.

The French daily, Libération, underlines the importance of the President, the right-wing Anibal Cavaco Silva who is at the end of his term of office, in deciding what happens next.

Portugal: un gouvernement de gauche suspendu à l’aval du président

The Financial Review reports on the new left coalition’s programme.

Underpinning Portugal’s new leftist alliance – together the four parties will control 122 seats – is a 138-page document aimed at gradually winding back the austerity measures adopted by the Passos Coelho government in 2011. Back then, the country was on the brink of bankruptcy and required an urgent €78 billion bailout from the eurozone and the International Monetary Fund. In exchange for this funding, the country was forced to implement tough austerity measures, including big wage and pension cuts. Under the agreement Costa reached with his left-wing allies, there will be an end to the freeze on pensions, a reversal of cuts to public sector salaries and a progressive increase in the monthly minimum wage to €600 ($914) by 2019. The agreement also scraps plans for the privatisation of public transport in Lisbon and Oporto, and will renegotiate the sale of the struggling, state-owned airline TAP to keep most of the company in government hands. For their part, the Left Bloc and the Communist Party dropped previous demands that Portugal’s debt be renegotiated. But to reassure Brussels that the end of these austerity measures will not trigger a budgetary blow-out, Costa has also committed to shaving back Portugal’s budget deficit to 1.5 per cent of GDP by 2019, down from an expected 3 per cent this year. All the same, investors are worried that Portugal’s economy, which is barely emerging from recession, is not strong enough to support a higher minimum wage. Portugal is still weighed down by a heavy debt burden (the country’s debt stands at almost 130 per cent of GDP) and the unemployment rate is still a painfully high 12 per cent (and 30 per cent for young people).Investors also fear the incoming centre-left Socialist-led government will be at the mercy of its more radical leftist allies if Portugal’s economy falters, or its borrowing costs rise.

The Finanical Times states,

Portugal’s markets kept their poise on Wednesday after the fall of the country’s centre-right government. Although the yield on 10-year sovereign debt rose to its highest level since July in early trade as investors cut their exposure, the pattern changed as the trading day developed. In mid-session exchanges, the yield on the benchmark paper, which moves inversely to prices, fell 4 basis points over the day to 2.72 per cent, moving off the earlier high of 2.83 per cent.