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Portugal's centre-right government returns to power

Published 22/10/2015

Portuguese president Anibal Cavaco Silva made a televised address
Portuguese president Anibal Cavaco Silva made a televised address

Portugal's president has invited the centre-right coalition government of the past four years to return to power after it won a general election, even though it will be outnumbered in parliament by opponents who vow to force it out within days.

The coalition won the October 4 ballot with 38.4% of votes and will rule as a minority government, with Pedro Passos Coelho expected to continue as prime minister.

But an unprecedented alliance of left-of-centre parties, led by the moderate Socialists and including the Communist Party and radical Left Bloc, has 122 seats in the 230-seat Parliament.

The alliance says it will use that majority to quickly bring down the government and take power itself.

President Anibal Cavaco Silva announced his decision in an address to the nation.

The political environment in Portugal has introduced a note of uncertainty into the 19-country eurozone that could rattle investors only recently settled after Greece's radical Syriza rang alarm bells. The issue is whether governments in the bloc are in a position to enact debt-reduction policies analysts say are needed to restore their financial health.

Debt-heavy Portugal needed a 78 billion euro bailout in 2011 amid the eurozone's financial crisis.

Its economy is improving but remains fragile, and the centre-right coalition says more austerity will be needed. Portugal's budget deficit last year was the second-highest in the eurozone at 7.2%, and government debt remains high at almost 130% of gross domestic product - the third-highest in the European Union. Portugal recorded average growth of less than 1% in the first decade of the century.

The head of state, who is usually a symbolic figure, faced two alternatives: bring back the government despite its disadvantage in parliament, or opt for an alliance of centre-left parties which have yet to provide details of their commitments to each other.

Mr Cavaco Silva said in a televised address to the nation that he could not give power to a government that opposed Portugal's membership of international institutions such as the European Union and the 19-nation eurozone. Both the Communist Party and the Left Bloc campaigned against the policies of those institutions, though the Socialist Party has said it would abide by eurozone financial rules.

"Out of the EU and the eurozone, Portugal's future would be catastrophic," Mr Cavaco Silva said. He said Portugal risked losing what it had gained after four years of hard times.

"I have to tell the Portuguese that I fear a loss of confidence (in Portugal) by foreign institutions, our creditors, and investors in foreign markets. The confidence and the credibility of our country are essential for investment and job creation," Mr Cavaco Silva said.

The Social Democratic Party and Popular Party coalition, which over the past four years has enacted unpopular cuts, have 10 days to form a government. After that, they need parliament's approval for their four-year policy programme - which the centre-left parties said they will not grant.

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