Portugal: Anti-austerity left alliance rejects right-wing government

 Trade union demonstration outside Portugal's parliament on November 10. Read more on Portugal.

By Dick Nichols

On November 10, the parties of the broadly defined left in Portugal—the Socialist Party (PS), the Left Bloc, the Communist Party (PCP) and the Greens (PEV)—won a motion of no-confidence against the short-lived government of the Portugal Ahead alliance of the conservative Social Democratic Party (PSD) and the neoliberal Democratic and Social Centre-People’s Party (CDS-PP).

The vote in the 230-seat national parliament was 123 to 107, with the one deputy from the animal rights party People Animals Nature (PAN) supporting the censure motion.

Portuguese president Cavaco Silva, whose October 22 decision to appoint the Portugal Ahead government has thus been overturned, must now decide whether to appoint PS leader Antonio Costa as prime minister or install some sort of caretaker administration until new elections can be called. Costa has reached three separate agreements for government with the smaller left parties,

New elections would take place in June next year at the earliest, because a presidential election is due in January and under the Portuguese constitution six months must pass before a newly elected president can call a legislative poll.

Cavaco Silva has become notorious for two speeches since the October 4 elections in which he effectively outlawed the PCP and Left Bloc from involvement in government. Yet if he refuses to appoint Costa as prime minister, he will surely guarantee eight months of social turmoil and increase the chances of the right losing the January presidential contest.

Already the mainstream left candidate for the presidency, former University of Lisbom chancellor António Sampaio da Nóvoa, has criticised Cavaco Silva for the time he is taking in appointing Costa and for not ruling out the idea of a caretaker government of the right.

Given the pressure, Cavaco Silva may in coming days very reluctantly appoint the PS leader as prime minister. Nonetheless, that outcome isn’t certain: the defeated coalition government of ex-prime minister Pedro Passos Coelho is combining with the Portugal’s economic and media elites to supply the president with every imaginable pretext for continuing to palm off Costa. If successful, they would turn him into a Portuguese Sir John Kerr (Australian governor-general responsible for sacking the Labor government in 1975).

Of the nine organisations that the president had consulted  by November 14 in his second round of discussions, six—all business umbrellas of various sorts—opposed appointing Costa prime minister, with only three, including the two main trade union confederations, in favour.

At a November 11 PSD-CDS meeting in the industrial city of Setubal, PSD vice-president Pedro Pinto said that “the agreement between the PS, PCP and Left Bloc hasn’t got any glue, any coherence.” Local PSD MP Bruno Vitorino raged that “what exists on the left is a non-government”; PS leader Costa was “a trickster, a special effects man who has produced a shoddy contraption posing as a sustainable left solution.”

At a November 12 Lisbon meeting acting prime minister Passos Coelho challenged the PS to support a constitutional amendment that would allow new elections to take place immediately. He said: “If those who want to govern instead of us don't want to rule as coup-makers or frauds, they should accept this constitutional amendment and let elections take place.”

CDS-PP vice-president Nuno Melo said: “I wouldn't like to believe that we live in a country where you can get away with deceiving the Head of State. Weeks ago António Costa claimed he could be prime minister because he had a stable, lasting solution. We found out a few days ago that he had nothing of the kind, but three  sleights-of-hand that have only one thing in common—aversion to the right.”

Pressure is also coming on from Brussels. In a November 12 speech to the European Parliament PCP deputy Inês Zuber denounced Valdis Dombrovskis, the commissioner for the euro and social dialogue, for saying that Portugal was headed towards catastrophe if it did not continue with austerity. To reinforce the message Günter Öttinger, commissioner for digital economy and society and former senior German Christian Democratic Union politician, awarded the German newspaper and magazine editors' “European of the Year” award to the 11 million Portuguese who, by accepting the 2011 “bail-out” of the European Commission, European Central Bank and International Monetary Fund (the “Troika”), had ”shown the way to greater employment and competitiveness”.

The left agreement

If Cavaco Silva finally manages to resist all this pressure from his friends and appoint Costa prime minister the incoming government will be a PS administration supported from outside by the Left Bloc, PCP and Greens. The smaller left forces will guarantee its stability in exchange for the PS adding 70 extra measures to its election program.

The agreement is for the PCP and Left Bloc to be consulted on the PS government’s budgets and to back it against censure motions from the PSD-CDS opposition. The agreement also contains a safeguard clause guaranteeing that no unforeseen shortfalls in revenue will lead to higher taxes on labour or lower wages and pensions.

It does not exclude censure motions from the PCP and BE in the event that the PS government fails to carry out the agreement. However, so long as the PS government abides by the accord it will have PCP and Bloc support. On this basis it becomes difficult for Cavaco Silva to continue to argue that the PS government would not be the “stable, coherent and credible” proposition he has been demanding.

For its part, the Left Bloc has not closed the door on participating in the government in future, but that require an agreement on issues where it presently disagrees with the PS, such as the need for debt restructuring.  The November 12 Avante! (Forward!), the PCP weekly, explained that party's position: “In the Joint Position of the PS and PCP on a Political Solution...a set of areas was identified where it is possible to ensure common action to respond to some of the most immediate problems of the Portuguese workers and people'. At the same time , the joint work carried out between the two parties confirmed divergent viewpoints on important issues, such as not to allow convergence around a governmental program.

“Despite this, as the PCP has always stated, the conditions exist for the formation of a PS government, for the presentation of its program, for its taking office and for the implementation of a policy that guarantees 'a lasting solution from the viewpoint of the legislature'.”

The starting point of the accords between the PS and the other left parties  were conditions put forward by Left Bloc leader Catarina Martins in a pre-election television debate with Costa: to win possible Bloc support the PS would have to drop its proposed reduction in the employer contribution to the Single Social Tax (TSU, a surcharge on workers and employers to help fund the social security system), remove the TSU from workers whose pension entitlements have been cut, drop an early lay-offs scheme and unfreeze pensions.

Given the election result in which it came second behind PSD-CDS, the PS had no choice but to accept. It also withdrew its proposal to “reform” the Portuguese electoral law to create British- or Australian-style single-member electorates, aimed at reducing the representation of smaller parties.

Wages and welfare

The measures agreed aim to reverse the impact of the austerity policies that were introduced into Portugal as the price of its 2011 “bail-out” agreement with the European Commission, European Central Bank and International Monetary Fund (the “Troika”), dutifully implemented by Passos Coelho government.

They cover four broad areas: increasing the purchasing power of workers and people on welfare, recovering and strengthening labour and union rights, stopping privatisations, and shifting the tax burden off the shoulders of the poor.

The minimum wage will increase from €505 to €600 a month over four years (a real increase of 10% on projected inflation rates) and workers whose income falls beneath the poverty line will be entitled to a new Annual Wage Complement. Public sector wages, cut under the Troika memorandum, will be fully restored by 2016.

The tax burden on the lower-paid will be reduced. Their TSU contribution will be halved in 2016 and then abolished by 2017, producing a €7.50 to €9 increase in take-home pay for workers on a gross monthly wage of between €505 and €600. For workers receiving less than €600 the basic social security contribution will also be reduced.

To help lighten the burden of poverty and address the social crisis, the agreement will:

·  Introduce gradual free access to resources required for school attendance, beginning with a textbook exchange scheme.  Smaller class sizes and universal pre-school provision are adopted as policy targets.

· Eliminate ambulance fees for patients referred to hospital emergency departments, increase the generic drugs prescription quota to 30%, increase the number of university places in health care and “employ all means necessary to reduce waiting time in public hospitals”;

· Cut the consumption tax rate on restaurant meals to 13%, introduce a reduced electricity tariff for 500,000 low-income families and restrict council rate hikes to €75 a year for low-value properties;

· End eviction orders arising from inability to pay debts to public authorities and allow the settlement of mortgage debt by surrender of the property to the creditor (“dation-in-payment”); Introduce flexible instalment plans for repaying outstanding tax or social security debt. 

People dependent on social welfare will benefit. The value of pensions’ will be restored to pre-Troika levels, as will the child benefit and the “solidarity supplement” for older people líving in poverty.

These welfare measures will mean, according to former Left Bloc leader and economist Francisco Louça, that “two million people will be better-off. In contrast, the right wing had vowed to go ahead with a €4 billion cut in social security (€1.6 billion from freezing pensions, plus €2.4 billion in benefit cuts), as promised to Brussels.”

Other reforms and funding

Labour and union rights will be restored and strengthened through the promotion of collective bargaining, the establishment of a National Program Against Casualisation and increased funding of the Work Conditions Authority. These measures will help the fight against common abuses such as false subcontracting and fake training schemes.. Four public holidays cut on Troika insistence will be restored.

Specific sections of workers, such as university researchers who have been forced to emigrate once their scholarships run out, will be guaranteed social protection, while career paths will be re-established in the public service. Once the budget allows, the 35-hour working week will be reinstated in the public sector and hiring of new workers resumed. 

The agreement also puts an end to the proposed privatisation of public transportation companies in Lisbon and Oporto, as well as to water company mergers presently being implemented against the will of local councils. Privatisation and outsourcing of public services will end and existing public-private partnerships subjected to independent evaluation.

The self-employed and small business will benefit from having their social security contribution obligations reckoned according to immediate past income instead of the present fixed-rate fee system.

How will the package be financed? Basically by increasing the tax burden on those who can afford to pay. To help fund the social security system, casualisation will be penalised by a new tax on companies that rely excessively on labour hire. Companies with large profits compared to their size of workforce will also be subjected to a new tax.

The number of income tax brackets will be increased to ensure greater progressivity, while perks for the rich and the big employers--such as the existing system of family endowment, company tax exemptions, under-taxed dividends and the 12-year period for claiming tax exemption against losses—will be eliminated or cut back.

The left majority will also introduce legislation guaranteeing the right to abortion and the right of same-sex couples to marry and adopt children.


What would the agreement among the left parties achieve, if implemented? According to Louça, “stability in people’s lives, relief for pensioners, wage recovery, job protection and greater tax justice.  Moreover, the resulting increase in demand will have an immediate positive economic reaction.”

What is missing? The fundamental problem areas that the agreement couldn’t touch, given the pivotal position of the PS, are those of Portugal’s stifling debt burden and chronic investment shortfall: only a radical debt restructure combined with a boost in public investment can break the stranglehold of stagnation on the Portuguese economy. The PS does not admit this, but at least there is agreement between the parties to set up a parliamentary working group to analyse the debt issue. Its reports should ensure that public debt becomes a more prominent concern of Portuguese politics, and could lead to the government coming under pressure to revive the Greek SYRIZA government’s proposal of a European debt conference.

Of course, such a development will only be possible if the PS government is actually installed and its supporters expect it to abide by its promises. In such a scenario the government will almost certainly get caught between the hundreds of thousands who expect it to implement its commitments and the imperatives of the European Union, especially its public deficit reduction targets.

The usual agents of financial blackmail will also operate—the share markets, the yields on Portuguese public debt, the ratings agencies. On November 15, as if to remind everyone how fragile the Portuguese economic recover is, the news was that the Novo Banco had failed European Central Bank stress tests to the tune of €1.4 billion of secure (“Tier One”) capital, which will have to be found somewhere in the next nine months. The most likely outcome is a fire sale of Novo Banco, reducing even more the proportion of the Portuguese banking system held by Portuguese owners.

To the rising economic pressure can be added the rabid Portuguese commercial media (already in “Venezuela mode”), the PS right wing (now openly organising to overthrow Costa at the party’s March congress) and the PSD-CDS's incessant threats of opposition without respite.

On November 11, PSD Setubal MP Bruno Vitorino said: “We can’t be afraid of getting out on the streets. The streets don’t belong to the protest professionals, to those paid by our taxes to go on demonstrations. The struggle in the streets has to be our struggle too.”

PCP leader Jerónimo de Sousa summed up the meaning of the political moment at a November 15 rally in the city of Marinha Grande: “This is the first step, a step forward, an important step to block the rampant offensive of these years and strike a blow against the politics of inevitability that has besieged the life of the Portuguese, so as to continue to struggle, taking further steps forward in the solution of urgent problems.”

Left Bloc leader Jorge Costa's analysis in a November 11 comment piece on the Esquerda.net web site painted the immediate prospect: “For those who have benefited from the past four years, a government that starts to function under the banner of restoring incomes is an unmentionable heresy and an outright invitation to the righteous wrath of Berlin. It’s precisely here that biggest threat to the majority agreement reached between the PS, PCP and Left Bloc lies—in the European war machine against social rights…

“From now on—and even more when European, employer and media pressure ramps up—a majority for the restoration of incomes depends on mobilisation. The people, pressing for the implementation of what has been agreed and for further advances, must again become lead actor… The journey begun on October 4 has hardly begun.”

[Dick Nichols is Green Left Weekly’s European correspondent, based in Barcelona. An earlier version of this article has appeared on its web site.]