Portuguese set to stick with what they know in elections

AP News
Posted: Oct 02, 2015 4:27 AM
Portuguese set to stick with what they know in elections

LISBON, Portugal (AP) — The past four years of austerity have been hard for Portuguese pensioner Rogerio Justino, his son and grandchildren. Despite that, he will vote Sunday to re-elect the country's center-right coalition government which imposed the tough measures.

Pay and pension cuts, steep tax increases, and deep cuts in public services were introduced after Portugal's 78 billion euro ($87 billion) bailout in 2011. That rescue averted the bankruptcy that loomed during the eurozone financial crisis as lenders cut off credit — scared away by the country's massive debts following years of government overspending.

"We had to have austerity. How else could we set things straight?" Justino, a 79-year-old former dental lab technician, said as he sat in the morning sun on a Lisbon park bench. "I had to adapt. We all did."

Europe needn't fear the rise of another radical party like Syriza in Greece, Spain's Podemos or Italy's Northern League, as Portugal's moderate, mainstream parties are poised to continue their dominance. The government is roughly level in polls with Socialist Party, the main opposition force. Both say they will abide by the eurozone's financial discipline.

The Portuguese took a sober look at their country after the years of lavish spending and concluded austerity was inevitable, according to Joao Cesar das Neves, an economics professor at Lisbon's Catholic University.

The economy is now improving, bringing promises from the main parties that they will gradually ease the tax burden.

Widespread discontent with austerity measures brought mass street protests. The government admitted its income tax hikes were "enormous." It regretted its cuts to pensions and government workers' pay. A further 3.5 percent surtax on pay and an increase in sales tax from 13 to 23 percent were painful but necessary, it said.

Things have improved enough for incumbent Prime Minister Pedro Passos Coelho to claim he got things right. The economy grew 1.5 percent in the first half of this year compared with the same period a year ago. The unemployment rate, which reached a record 17.7 percent in 2013, has continued to drop, falling to 12.3 percent in July. Consumer confidence in September was at its highest since 2001.

Portugal "can't go backward ... after all the sacrifices we've made," Passos Coelho says.

A year ago, the Socialists looked like a shoo-in, but the improving economy has taken the wind out of their sails. The Socialists also bear the stigma of having led Portugal to the brink of bankruptcy four years ago.

The Socialists are also losing votes to rival and more radical parties on the left, such as the Communist Party and the Left Bloc, which could collect 10 percent and 5 percent of the vote respectively. Meanwhile the coalition government — made up of the Social Democratic Party and the junior Popular Party — has united the right-of-center vote.

On top of that, Socialist leader Antonio Costa's image is tarnished by his closeness to former party leader and prime minister Jose Socrates, who was in power before the bailout and has spent 10 months in prison while police investigate him for suspected corruption, money-laundering and tax fraud.

Costa says he wants to "end austerity without leaving the euro." He vows fiscal discipline but also promises to lower the restaurant sales tax from 23 to 13 percent, bring back four public holidays that were abolished to improve productivity, and restore slashed government workers' pay.

Though no political upheaval is expected, the ballot could bring another problem: political gridlock, consigning the country to months of political paralysis just when it needs to strengthen its frail economy.

That's because with no party apparently set to secure a majority of 116 seats in the 230-seat Parliament, the winner won't be sure of approval for its policies.

Only one minority government in Portugal has ever completed its four-year term. The average span is 14 months.