As previously discussed, it’s not obvious to voters that the currency itself is the problem.
Instead, what seems obvious is that the prior governments were at fault for their irresponsible fiscal policies for which the price is now being paid.
By Joao Lima
June 7 (Bloomberg) — Pedro Passos Coelho, Portugal’s incoming prime minister, was told by President Anibal Cavaco Silva to start talks immediately on forging a coalition to ensure austerity measures mandated by a 78 billion-euro ($114 billion) bailout stay on track.
The order that Coelho move came in their meeting yesterday in Lisbon less than 24 hours after the Social Democrat unseated Socialist Jose Socrates, Jose Manuel Nunes Liberato, a presidential aide, told reporters.
Starting talks with the People’s Party before all the results are in underscores officials’ concerns over meeting deadlines prescribed in the bailout. Leaders of the third-place finishers meet today in Lisbon and may signal their demands to join as Coelho’s junior partner.
“There is a majority government and that is a necessary condition to implement the very difficult structural reforms and the challenging fiscal consolidation,” Antonio Garcia Pascual, chief southern European economist at Barclays Capital in London, said yesterday.
Coelho’s Social Democrats and the People’s Party, won a combined 129 seats in the 230-member parliament with four seats yet to be decided, according to official results.
While all three major parties committed to the bailout’s program of spending cuts and asset sales, a new majority taking over from Socrates’ minority administration gave bonds a boost. Yields on 10-year notes rose 8 basis points to 9.372 percent in Lisbon as of 10:16 a.m. today.
Opposition wins Portugal election. Portugal’s right-of-center Social Democrats have the dubious privilege of imposing massive budget cuts and risk further exacerbating the country’s economic woes after winning yesterday’s election with around 40% of the vote. The Social Democrats will probably form a coalition with the conservative Popular Party and so gain a majority in parliament. This will make it easier to implement austerity measures, such as welfare and pay cuts, and tax rises, as the government looks to comply with the terms of a €78B ($114B) bailout. The coalition takes office with unemployment at a record 12.6% and with the economy forecast to contract 4% over the next two years.