May 27, 2019 / 2:05 PM / a month ago

Portugal's Socialists prepare run for majority rule after EU vote

LISBON (Reuters) - Portugal’s ruling Socialists are prepared to ditch their far-left allies and go it alone at a general election in October, emboldened by their sound economic management and a weak opposition to seek majority rule.

FILE PHOTO: Portuguese Prime Minister Antonio Costa gestures during a parliamentary debate in Lisbon on the 2019 state budget, November 29, 2018. REUTERS/Rafael Marchante/File Photo

The gambit was boosted by the Socialists’ strong showing at Sunday’s European elections with 33.4% of the vote - making them the continent’s most popular center-left party in percentage terms - as they captured support from the center-right.

Socialists have made partial comebacks in parts of continental Europe, including in neighboring Spain. But apart from tiny Malta, a left-wing majority government is not in power anywhere, which would make Portugal a rarity.

Polls at the beginning of the year put Prime Minister Antonio Costa’s Socialists at around 40% support. Their popularity dipped through the spring to 35%, partly over a nepotism dispute, but it has since bounced to 39%, according to the two latest polls, including one on Sunday.

That puts them within spitting distance of a majority, which analysts say is around 42-43% under Portugal’s proportional representation voting system.

A majority government could be positive for the economy, holding out the hope of continued openness to foreign investment, budget rigor and possible labor market reforms. Portugal has put in its strongest performance in at least two decades under the Socialists after the 2011-14 debt crisis.

Sources close to the government say there is growing discomfort with harsh public criticism by the Left Bloc and Communists, above all over economic policy, aimed at Finance Minister Mario Centeno, who also chairs the Eurogroup of his euro zone counterparts.

“These (European) results show a vote of confidence in the Socialist Party. We came out of this night with more energy, more determination to fulfill this dream (of a strong result),” Costa said on Sunday, referring to the coming October ballot.

“Any party wants the obvious, to win with the biggest result possible,” he said.

CENTER-RIGHT’S WORST NIGHT

The European election outcome was especially pleasing for the ruling party because their main adversaries, the center-right Social Democrats, won just 22% of votes, their worst showing ever in any election in Portugal.

“Evidently (a Socialist majority government) could happen, but exceptional conditions are necessary such as a big crisis in the (center-right opposition) PSD,” said political analyst Antonio Costa Pinto.

PSD leader Rui Rio said “we didn’t reach the objectives we hoped for” and his party had to recognize its errors.

The Socialists appear to have gained from a misstep last month by the center-right when it united with the government’s leftist allies to pass a parliamentary vote to raise teachers’ salaries, prompting the prime minister to threaten to resign.

The Socialists worried the move would undermine public accounts and Costa’s threat was widely seen bolstering their credentials as competent managers of the economy, which could have helped their standing in the latest polls.

Communist leader Jeronimo Sousa recently accused the Socialists of being “fixated on an eventual absolute majority” and said it was clear the Socialists “want to undo the current arrangement”.

Ana Catarina Mendes, deputy head of the Socialists, told Reuters it was premature to conclude that they want to ditch the far-left, pointing out that it had backed the overwhelming majority of laws during the past three and a half years.

The Socialists turned to the Communists and the Left Bloc in 2015 to propose a parliamentary alliance to secure a majority and oust the center right after an inconclusive election.

Their deal was based on rolling back the austerity launched by the center-right government during Portugal’s debt crisis and 2011-14 bailout. The government has restored public pensions and reversed tax hikes, which has given more disposable income back to the Portuguese and helped fuel a strong economy.

But at the same time the government has insisted on strict spending controls which have virtually eradicated the budget deficit - something unheard of in Portugal’s modern democratic history and which is proving popular with centrist voters.

That has also helped erase from memory that it was a previous Socialist government that mismanaged the economy and forced Lisbon into a bailout.

“The crisis has left its mark; budget discipline has become a relevant issue for voters and is now part of the way they conceive the government’s ‘economic competence’,” said political scientist Pedro Magalhaes.

Additional reporting by Catarina Demony Writing by Axel Bugge; Editing by Andrei Khalip/Mark Heinrich

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