Portugal's New Government Must Cut Deficit

Official results show Portugal's Social Democrats have unseated the Socialist government in an emphatic election victory. The Socialists appeared to pay heavily for the country's steep economic downturn which forced it to ask for a bailout.

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Portugal is among several European Union countries that have come so close to financial collapse that they needed a bailout. Yesterday, Portugal elected a new government which has a strong mandate to enact the tough deficit-cutting measures required for an international bailout. NPR's Sylvia Poggioli joins us now from Lisbon. Good morning.

SYLVIA POGGIOLI: Good morning, Renee.

MONTAGNE: So tell us who won the election and what kind of government will come out of that.

POGGIOLI: Well the new prime minister will be 46-year-old Pedro Passos Coelho. He's the leader of the Social Democrat Party, which is actually a center right party. He's a man with a business background, but without much political experience. His party won 39 percent of the vote, and he's expected to form a coalition with the smaller conservative popular party, and that will give him a solid majority in parliament.

The markets and international investors will welcome this result, because the next government will have to enact a very demanding austerity program in exchange for a huge bailout, more than $112 billion from the European Union and International Monetary Fund. The new prime minister has also vowed to privatize several state-run enterprises.

Portugal follows Greece and Ireland in having to seek this international assistance to cut its big deficit and pay its debt. And as in local elections in Spain last month, voters blamed the ruling socialists for the economic crisis that here has already produced a record unemployment rate of more than 12 percent and rising.

The outgoing Prime Minister Jose Socrates, he admitted defeat shortly after the first exit polls were announced, and he said he would resign as Socialist Party leader.

MONTAGNE: Tell us more about that deficit-cutting program the government will now have to enact.

POGGIOLI: Well, you know, even though the outgoing government had already made cutbacks, this deal requires even more drastic reform of the welfare system. The new government will have to enact more than 200 measures over the next two years, cutting public spending and reforming the justice and labor systems. And some of these measures may require constitutional amendments, which means the government is going to need opposition support.

It's already been forecast that Portugal's economy will contract by four percent in two years and that means a very sharp decline in living standards in what is already Western Europe's poorest country. And like Greece and Ireland and neighboring Spain, Portugal will have to slash its deficit in the midst of a recession, and at the same time try to simulate growth. So the new center right government is going to need all the consensus it can get.

MONTAGNE: Well, we've seen big protests in Greece. How are the Portuguese facing this economic crisis?

POGGIOLI: Well, there's much less of a tradition here, of taking to the streets and demonstrating against the government, and there's widespread awareness that the cause of the crisis starts at home, because of easy credit and overspending. But poverty is increasing, already two out of five children live in poverty and they're beginning to be some strikes.

The mood is very, very bad. There was a great deal of disaffection. They had the highest abstention rate in Portugal, ever, 43 percent of eligible voters stayed at home and there's a sort of an inward looking thing. They don't trust their political parties, but they're also very disappointed with how the European Union is handling the crisis.

And you hear people talking about a growing north-south rift in European Union, and northern prejudice against southerners. Many people were angered by German Chancellor Angela Merkel's recent claim that the Portuguese have too many holidays when it turns out that the Germans who have more holidays.

MONTAGNE: We've been talking to NPR's Sylvia Poggioli, from the Portuguese capital of Lisbon. Thanks very much.

POGGIOLI: Thank you, Renee.

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