Austerity Arrives in Lisbon

How Portugal Will Fix its Economy

Courtesy Reuters

Portugal’s general elections on June 5 moved the country sharply to the political right. The elections took place against the background of economic crisis that rendered the country yet another Eurozone casualty of unsustainable public debt. Despite months of denial, Portugal has been forced, like Greece and Ireland, to seek a bailout from the European Community, the International Monetary Fund, and the European Central Bank. The Portuguese parliament had refused to accept the Socialist government’s austerity measures, and as a consequence, President Aníbal Cavaco Silva called a general election. The reigning Socialists were swept out of office, and a conservative majority was elected to replace them.

Pedro Passos Coelho, the new prime minister, is 46 years old and has never held office. Yet he has a long history of political activism within the center-right Social Democratic Party (PSD), which he currently leads. PSD was one of the new political organizations to emerge after the coup of 1974, in which young military officers, tired of fighting Portugal’s colonial wars in Africa, overthrew the long-running right-wing dictatorship. The PSD began consolidating its role as a force on Portugal’s democratic center-right in 1979, when it won a general election and liberalized the country’s cumbersome restraints on businesses and private enterprise.

The PSD relied on its economic credentials to gain 40 percent of the vote on June 5. The Socialist Party, led by the outgoing prime minister, José Sócrates, received only 28 percent of the vote, and when the result became clear, Sócrates resigned as party leader, saying that he "took full responsibility for the outcome." Belmiro de Azevedo, one of the county's leading entrepreneurs, said that Sócrates earned a place in the “Guinness Book of World Records” for having done "so much, so badly, and in so little time." Azevedo’s remarks testified to the fact that Sócrates refused to accept the depth of his country’s financial crisis, even after Greece and Ireland were forced to accept bailout deals, avoiding

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