Portugal's Communists would back government led by Socialists

Reuters News
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Posted: Oct 07, 2015 6:54 AM

By Sergio Goncalves and Axel Bugge

LISBON (Reuters) - Portugal's Communists would support a Socialist-led government, the party's leader said on Wednesday, marking a shift that further complicates efforts by the outgoing center-right coalition to form a minority administration.

Political uncertainty following last weekend's election threatens to derail a fragile economic recovery in Portugal, which endured years of austerity after being bailed out by its euro zone partners and the International Monetary Fund.

Pedro Passos Coelho's coalition won the most votes but lost its parliamentary majority in Sunday's poll and he is currently serving as caretaker prime minister.

"A government solution, which inevitably includes the Socialists, will have our political support, to stop a repeat of this policy (of austerity)," Communist leader Jeronimo de Sousa said after meeting Socialist counterpart Antonio Costa.

The hard-left party has usually accused the Socialists of not following the right policies and de Sousa's comments mark a major shift. If they can overcome traditional differences, the Socialists, Communists and far-left Left Bloc -- with which Costa will meet on Thursday -- hold enough parliamentary seats to form a majority administration.

If Passos Coelho were to form a minority administration, he would need at least periodic support from the Socialists to get legislation passed. Costa will meet Passos Coelho on Friday.

"The Socialists will have to decide between backing a center-right government or taking the initiative of forming a government which has a guarantee of being able to function," de Sousa told reporters.

Costa, who earlier ruled out entering into a formal coalition government with the center-right, said the meeting with the Communists was positive.

"I don't want to draw conclusions, this was a first meeting, it was very positive," Costa said. "There is serious work that we have to do. For sure we are going to have working meetings to deepen these points."

Analysts said the Socialists were still most likely to back Passos Coelho, even though the party is deeply divided following its defeat in an election held after years of spending cuts, tax rises and recession.

Passos Coelho's center-right grouping holds 104 seats in the 230-seat parliament, the Socialists 85 seats, the Left Bloc 19 and the Communists 17.

"The Socialists will talk on the right and left because they want to be seen as the boss of the political wheel," said political analyst Antonio Costa Pinto.

"That could lead to long talks and some uncertainty about a formal agreement. But ultimately the Socialists will support the government, even if there's no formal deal."

The Socialists want to ease austerity but back budget goals agreed with the European Union. Both the Communists and the Left Bloc back a renegotiation of Portugal's debt load, but the Left Bloc has dropped its opposition to the euro currency.

President Anibal Cavaco Silva, who on Tuesday gave Passos Coelho the mandate to form a new government, has urged all political parties to show a spirit of compromise.

(Editing by Catherine Evans)