Portugal's political crisis - as viewed from California

Mike Shedlock

lisbon2 The recent Portuguese election on October 4th was "inconclusive". The center-right scored the most votes but could not muster a coalition majority.

A coalition of leftist parties could form a government, but the president of Portugal (a largely symbolic position except in cases like these) refused to appoint a leftist prime minister on the grounds that they represent anti-European forces. Instead the president allowed the pro-EU Prime Minister to stay in place.

That government will fall this week, but first let's recap what Nigel Farage said about yet another Eurozone puppet government.

Nigel Farage Speaks Out on the Situation in Portugal:

“As this migrant crisis begins to overwhelm the European Union, and yes it is an existential crisis, perhaps we should ask ourselves what really is the true nature of this project? Because I've heard a lot today about rights, well what about democratic rights? Because I think what we are seeing is an increasingly authoritarian European Union that crushes democratic rights and then actually crows about it.

“Every single time there is a crisis, it is national democracy that loses. We saw back in 2011 the Italian Prime Minister Berlusconi sounding Eurosceptic, removed and replaced by a puppet Prime Minister. We saw exactly the same happen in Greece in 2011, Mr Papandreou threatened a referendum on Euro membership, there was a coup against him, he was replaced by a puppet.

"In this migrant crisis we've seen four countries, led by the strongest, Hungary, making it clear they want no part of EU migrant quotas, only to find themselves crushed through EU trickery and made to accept the very thing they said no to.

“And I never forget seeing the Greek Prime Minister Mr Tspiras sitting just over there having won a General Election and then come to this House to be told that the manifesto was unacceptable and it must be ditched. Well I think all of this has reached a new low this week with Portugal. Virtually unremarked upon by the media and yet for those who don't know there is now, following a General Election, a left wing majority with a socialist plan for Portugal, and yet the President of Portugal, Mr Silva, is refusing them office on the grounds that they represent anti-European forces and is allowing the minority Conservative pro-EU Prime Minister to stay in place.

"This is the modern day implementation of the Brezhnev doctrine. This is exactly what happened to states living inside the USSR.

"What is been made clear here with Greece and indeed with Portugal is that a country only has democratic rights if it's in favour of the project. If not those votes are taken away and perhaps none of this should surprise us, as Mr Juncker has told us before, "there can be no democratic choice against the European treaties", and the German finance minister Mr Schauble has said, "elections change nothing. There are rules...”

The Financial Times says 'Leftwing Alliance Set to Topple Portugal’s Government...'

An unprecedented alliance between Portugal’s opposition Socialists (PS) and the far left is poised to bring down the country’s two-week-old centre-right government this week and replace it with an “anti-austerity” administration.

The fall of the minority government led by Pedro Passos Coelho, the prime minister, became almost certain over the weekend when the PS sealed a pact with the radical Left Bloc (BE) and Communist party (PCP) on providing majority support for a Socialist-led alternative administration.

António Costa, the PS leader who has bridged 40 years of ideological schisms to forge a new leftwing alliance, is expected to become the next prime minister, shifting Portugal’s alignment in the EU from a defence of tough fiscal discipline to support for easing austerity.

The programme supported by the left calls for public sector wage cuts made during Portugal’s international bailout to be restored within a year, as well as increasing social benefits and cutting taxes. Opponents say such fiscally expansive measures could place Lisbon on a collision course with the European Commission.

Mr Passos Coelho’s minority government, which took office on October 30, is almost certain to be defeated in parliament on Tuesday by a rejection motion tabled by the left-of-centre majority following a two-day debate on its programme. Losing the vote implies the government’s resignation and the appointment of a new prime minister by President Aníbal Cavaco Silva.

The president has issued strongly worded warnings against the prospect of a government supported by parties such as the BE and the PCP, which favour unilateral debt restructuring, oppose the EU’s fiscal compact on deficit reduction and disapprove of Portugal’s Nato membership.

But the conclusion by the PS this weekend of three separate agreements with the BE, the PCP and the small pro-Communist Greens on supporting a PS-led government leaves Mr Cavaco Silva with little alternative but to swear in Mr Costa as the next prime minister should Mr Passos Coelho lose Tuesday’s vote.

Costa says he is committed to keeping the country in the eurozone and will respect the three percent budget deficit rules.

However, I highly doubt he can raise wages and benefits for public workers and simultaneously keep that fiscal promise

Posted by Michael Shedlock

Mike Shedlock is a registered investment advisor representative for SitkaPacific Capital Management.