Portuguese embrace tough austerity

IT is a very Portuguese paradox: faced with swingeing austerity measures and far-reaching structural reforms resulting from the country's $114 billion IMF-EU bailout, voters have opted for more pain, not less.

They've shown the door in no uncertain manner to prime minister Joao Socrates, who headed a failed left-of-centre Socialist Party (PSP) government.

In his place, they've elected the centre-right Social Democrat (PSD) government led by Pedro Passos Coelho, a 46-year-old political neophyte pledged not only to scrupulously comply with the harsh terms of the bailout but also to go even further.

The new government, a coalition with the right-wing CDS-PP that will command a 130-seat majority in the parliament, is determined, Coelho says, to "surprise" investors by not just achieving the bailout's deficit reduction targets but doing so ahead of time.

"We will be much more ambitious," he has said, outlining reforms that include a far more extensive privatisation program, long a hot-button issue in Portuguese politics.

The package sets a three-year or better schedule to achieve painful public spending cuts, tax increases and economic reforms that go to the heart of the constitution drawn up after the 1974 Carnation Revolution overthrew the 40-year Salazar-Caetano dictatorship, and challenge long-standing workers' rights, and generous welfare, healthcare and education systems.

By the end of the year, Coelho will need to have tackled potentially explosive issues such as compensation for dismissed employees, health charges and privatised medicine, a prospect that might have been expected to shore up support for the socialists.

Instead, voters gave the PSP its biggest drubbing in almost 30 years, leaving it with just 28 per cent of the vote compared with 39 per cent for Coelho's PSD and 12 per cent for his CDS-PP allies.

In a country where, since the Carnation Revolution, trade union and workers' rights have been paramount, the election of a government willing to go even further than the harsh measures proposed in the bailout package is remarkable.

Socrates quit in March when he was defeated in parliament over a stability and growth package aimed at avoiding the need for Portugal to resort to external aid.

After the election was called, he sought an EU bailout and the PSD, CDS-PP and Socialists all eventually signed up to it.

That was not enough to save the Socialists, whose defeat falls into a Europe-wide pattern, with governments at risk from voter disenchantment over the debt crisis. With the demise of Socrates's government, only five left-wing governments remain in office among the EU's 27 members: Spain, Greece, Austria, Slovenia and Cyprus. Polls show Spain's could be next to go.

In Portugal, the Socialists have ruled for much of the time since the 1974 revolution. The party is closely identified with safeguarding workers' rights.

In normal times, with unemployment running well above 12 per cent and the economy in deep recession, it might have been expected voters would not go for a centre-right government pledged not only to apply stern bailout terms but to go further.

In the election, Socrates accused Coelho of seeking "the most radical right-wing program ever presented in Portugal." Voters, however, were unimpressed, showing the Socialists the door.

Without the social unrest seen elsewhere in Europe over the debt crisis, Portugal's voters were, it seems, willing to bite the bullet and accept the need for austerity.