(Corrects 23rd par to make clear Seguro is Socialist leader,
By Andrei Khalip
LISBON, July 24 Portugal's political crisis may
have been papered over but the ill-timed power games have done
little to help the bailed-out country's credibility abroad.
Featuring several U-turns, including an "irrevocable"
resignation by a junior governing coalition partner which
ultimately led to his promotion, the crisis wasted a precious
three weeks and left its protagonists weakened and facing the
same heap of economic problems to solve as before.
The economy is still in its worst recession since the 1970s,
deepened by austerity terms attached to its EU/IMF rescue loans,
and Lisbon still has to cut its fiscal deficit to ensure funds
"Sadly, the crisis leaves Portuguese politics facing certain
third-worldish disdain from abroad," said Adelino Maltez, a
political scientist in Lisbon. "Even our president said it's an
unpredictable country, investors see it too and hardly like it."
The president, Anibal Cavaco Silva, showed his own lack of
predictability by rejecting a government-proposed solution to an
internal rift. He then went on a two-day bird-watching trip to
the remote Savage Islands in the middle of the Atlantic.
His intention was to leave the main parties alone to
negotiate a "national salvation" pact he had requested but he
then made comments about the crisis to an army of reporters who
accompanied him. Ultimately, it also left the 74-year-old
president looking out of touch.
"It was a calm night and there have been no unpleasant news
from Lisbon," he said on Friday morning, just hours before the
opposition Socialists broke off talks with the two parties of
the ruling coalition and said no deal was possible.
The Socialists' proposals showed they simply wanted to end
all austerity, which would have defeated the purpose of an
Cavaco Silva wanted a cross-party pact to support the EU/IMF
bailout, which requires the continuation of debt-cutting
policies until the bailout programme is due to end in mid-2014,
although a return to market funding is now in doubt.
Analysts say there is no choice but to stay the general
austerity course, begging the question as to why this political
crisis flare in the first place.
RESIGNATION THAT WASN'T
The last three weeks has featured a catalogue of
self-inflicted wounds by Portugal's ruling class.
The crisis began on July 1 with the resignation of Finance
Minister Vitor Gaspar - the architect of the austerity drive -
who cited waning support for his strategy. One newspaper, "i",
said in a widely quoted report that the last straw for Gaspar
had been an angry customer in a supermarket spitting at him and
The next day, the crisis spiralled when Paulo Portas, the
leader of the rightist CDS-PP junior coalition party that
guaranteed the centre-right government's parliament majority,
resigned as foreign minister.
He said he objected to the promotion of Gaspar's close
colleague Maria Luis Albuquerque to finance minister. His
"irrevocable" resignation came just minutes before Albuquerque's
swearing-in ceremony, which nevertheless went ahead - without
any of the three CDS-PP ministers present.
Prime Minister Pedro Passos Coelho refused to accept Portas'
resignation, the two patched up their differences and agreed to
preserve the coalition on the condition that Portas became
deputy prime minister managing talks with the lenders.
Albuquerque, whose appointment was hailed by Brussels as a
sign of continuity, remained finance minister, although now
outranked by Portas.
Most of Portas' party top brass had been caught unawares by
his resignation and some openly criticised the move, leading to
rumours of his replacement as party leader.
"The key problem is the hypocrisy of our politics - there is
no liberal right, while the so-called right is happy to defend
the welfare state to get votes," Maltez said, adding that all
the main leaders showed they have little control over their
FOOD FOR SATIRE
With the crisis seemingly solved and Portugal's risk
premiums falling back after a big jump, the president dropped
his bombshell, rejecting the coalition's solution and calling
for the broad political deal.
To lure the Socialists, who lead in opinion polls, he
promised them an early election in 2014 if such a deal was
The events provided plenty of food for satire, which spared
none of the political figures, while commentators called the
situation a bad soap opera or a theatre of the absurd.
"The country deserved another political class, more adult,
less given to spats and ready to put Portugal's interests above
their own," business daily Diario Economico said in a recent
With the Socialists effectively demanding the bailout
agreement be ripped up, no agreement was possible after six days
of talks with many analysts blaming leader Antonio Jose Seguro
for buckling to pressure from within his party.
The president belatedly approved the promotion of Portas and
the continuation of the existing coalition.
Nicholas Spiro, managing director at Spiro Sovereign
Strategy in London said the president's intervention had only
exacerbated divisions between the government and the opposition.
"The politics of economic reform in Portugal have become
even more treacherous," he said, warning that political support
for the reforms demanded by the lenders has eroded sharply.
(Editing by Mike Peacock)