Just over a month ago, when the center-right coalition led by the leader of the Pedro Passos Coelho Social Democratic Party managed to win the Portuguese government elections, winning 38,6% of the votes, Europe welcomed the result with undisguised satisfaction. The Prime Minister's confirmation at the helm of the country was considered a tangible sign that those who apply austerity not only clean up their accounts but can also win the favor of the citizens. A breath of fresh air for Brussels after Greek excesses had aroused more than one concern among commission and council members. Lisbon exited the EU, ECB and IMF program last year, bringing the accounts under control, while GDP should grow by 2015% in 1,6, despite unemployment still at 13%.
Instead, Passos Coelho's presidency of the Council was short-lived. Yesterday afternoon, with the markets closed, Parliament disheartened him with 123 votes out of 107 thanks to a legislature alliance formed by the Socialist Party, the Communist Party and the Left Bloc (extreme left political force) and the Greens.
At this point it will be up to the President of the Republic Anibal Cavaco Silva to try to resolve the situation after a few days ago he made a desperate attempt to appoint the centre-right leader to form a government despite the lack of an absolute majority. The aim was to calm the markets by closing the door on the left, intent on repudiating the austerity program imposed by the Troika to Portugal in exchange for €78 billion in aid.
As the hours go by, it therefore appears increasingly probable that the Head of State will decide to entrust the task of launching a new minority government to the leader of the socialists Antonio Costa who in the last elections had obtained 32% of the preferences. Alternatively, the country could go into the hands of a Technical Executive who will lead Portugal until the next electoral round which, according to the Constitution, could be held in six months.
We recall that the agreement signed by the Lusitanian left provides for the restoration of the indexation of pensions, the reintroduction of subsidies for poor families and of collective bargaining, the increase in public salaries and the return of public holidays abolished by the previous government. Measures that neither the Troika nor Brussels like at all, worried both by what is happening in Portugal and by the political repercussions that the current situation could have in Athens and Madrid.
But the doubts do not stop at the political aspect. Portugal has not yet presented the 2016 Stability Law and for next year the country's financial needs are estimated at 20,2 billion euros, of which 7 for maturities of securities and 10 for early repayments to the IMF which had to be covered with the privatization plan and with public debt issues.
Meanwhile the markets are watching what is happening in Lisbon. Yields on ten-year bonds, stuck at 2,3% until a few days ago, have now risen to 2,77%. From the beginning of November to today, the Lusitanian stock exchange has lost about 8%, while today Lisbon is proceeding cautiously, rising by 0,55%.
