Portugal’s anti-austerity rebels force out centre-right

Portuguese prime minister Pedro Passos Coelh, centre, has resigned following his defeat in parliament. Picture: Getty

The showdown came less than two weeks after the government was sworn in.

The moderate Socialist Party forged an unprecedented alliance with the Communist Party and the radical Left Bloc to get a 122-seat majority in the 230-seat parliament and vote down the proposals, bringing the government’s automatic resignation.

After four years in power the government lost its parliamentary majority in a 4 October general election, which saw a public backlash against austerity measures adopted following a €78 billion ($84bn) bailout in 2011.

Socialist leader Antonio Costa is expected to become prime minister in coming weeks, supported by the communists and left bloc.

They have promised to alleviate austerity, though critics fear a return to borrow-and-spend policies. The leftist alliance intends to reverse cuts in pay, pensions and public services, as well as tax increases that have brought widespread hardship, street protests and strikes in recent years.

Outside Parliament, demonstrators at an anti-austerity protest by labour groups shouted “Victory!” as the news of the vote spread.

The current political upheaval has its roots in years of low growth and borrow-and-spend policies which weakened Portugal and compelled it to ask for the 2011 bailout amid the eurozone’s debt crisis. The centre-right government introduced debt-reducing austerity measures demanded by creditors.

The government’s collapse was a setback for the 19-nation bloc’s austerity strategy demanded by Germany and the others as a remedy for the crisis. Eurozone leaders pointed to Portugal, and Ireland, as examples of how austerity paid off. Now, the progress Portugal made is in doubt, and some fear the country could go down the same road as Greece, which has needed three bailouts since 2010.

If the leftist alliance triumphs, it would give heart to anti-austerity forces in much bigger neighbour Spain, where a general election is scheduled for 20 December.

Portugal’s budget deficit in 2010 was more than 10 per cent but the European Union estimates it will be around 3 per cent by the end of this year. Unemployment, which surged to a record 17 per cent after the bailout, has fallen to 12 per cent.