June 22, 2016 / 1:52 PM / 3 years ago

Portugal's political stability is Europe's rare pleasant surprise

LISBON (Reuters) - When Pedro Nuno Santos turns up for work at Portugal’s parliament each morning, he never knows whether there will be space for him in his own office.

Pedro Nuno Santos poses for a portrait between the legislators of Socialist party and left bloc inside Portuguese parliament n Lisbon, Portugal June 21, 2016. REUTERS/Rafael Marchante

    The room on the first floor of Lisbon’s 16th-Century parliament building is where the Socialist minority government meets with two far left parties that sustain it. All legislation is negotiated on sofas packed into the large sitting area before bills are put to a vote in the main chamber.

According to Santos, who serves as the government’s main political negotiator, there have been about 350 meetings with the leftists since the administration took power in November. That translates into about three meetings every working day, many of them attended by government ministers.

“The meetings are systematic and take place constantly, there have been hundreds of them,” Santos told Reuters. “Often, my office is busy with meetings. I never know … where to go.”   

The alliance between the center-left Socialists and far left is referred to disparagingly as “geringonca” — a helter-skelter arrangement — in the media, and was widely seen as doomed to swift collapse when it was formed last year.

But it has so far confounded expectations by enduring, providing something rare for investors in the European Union: a pleasant surprise.

    Six months ago, yields on Portuguese sovereign debt had spiked on fears that the government would be unstable and pursue unworkable policies as part of an anti-austerity movement sweeping across southern Europe.

Now, with Britain about to vote on leaving the EU and Spain heading into its second election in six months, Portugal, one of the countries hardest hit by the euro zone financial crisis, has proven an unlikely haven of political stability.


    The unusual alliance between the far left and pragmatic center-left Socialists has produced the first minority government since Portugal returned to democratic rule in 1974 after decades of authoritarian rule.

    Its surprising longevity has even raised the prospect that it could be a model for its bigger neighbor Spain, which holds a general election later this week after an inconclusive vote in December.

Portugal’s center-right Social Democrats won the most votes but fell short of a majority in an election in October. That opened up an opportunity for the Socialists to form a minority government with support from the Communists and the Left Bloc, despite years of hostility among the three groups.

    By stopping short of forming a formal coalition, the three parties were able to keep their separate identities. But they were also forced to find a new ad hoc way to make policy.

“We created working routines, we understood what works best, what works worst, what can be done more quickly and what needs to be done more slowly,” said Jorge Costa, a member of parliament for the Left Bloc.


Given the rivalries, the alliance was widely predicted to stumble at the first hurdle - the 2016 budget. But so far it has managed to stick to strict budget goals agreed with Brussels, while delivering on some promises of rolling back austerity by reducing cuts to civil servant salaries and pensions.

There are still fundamental disagreements. The Left Bloc and Communists remain staunchly anti-austerity and insist that creditors must write off Portugal’s debt. The Socialists insisted in their initial pact that commitments to Europe must be maintained.

Still, six months in, even opponents accept that the system is not necessarily headed for collapse.

   “We don’t know what will happen,” said Miguel Morgado, deputy head of the opposition Social Democrats in parliament. “But each of the leftist parties have incentives to remain in the coalition, that is the decisive point, and none of them want elections.”

“As long as the three parties want it to (last), it will.”

    According to Costa of the Left Bloc, the system works because of the constant discussions. Every week “ministers from every area come to parliament to meet with our leaders and we are able to accompany the government’s big policy options and be informed, and be able to state our opinion on them early.”

    Early in the year, investors took fright that the government would be unable to stick to budget goals and reverse reforms under a 2011-14 bailout, sending bond yields sharply higher.

But the government was able to pass the 2016 budget, a long-term stability plan required by Brussels and a national reform program.

    The next hurdle, which many analysts have said could be the point at which the alliance breaks, is the 2017 budget which will be presented in the autumn, when the leftists could ramp up their demands. Santos said talks on the budget have already begun.

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    “I’m not saying that the negotiations for the 2017 budget will be easy, they won’t be and they will be long and hard, but they will take place in better conditions than the situation ahead of the 2016 budget,” said Costa of the Left Bloc.

Santos, meanwhile, is confident that the meetings in his office will continue for the foreseeable future.

“Clearly at the beginning there were doubts,” he said. “But I think questions about the solidity and stability of the government have been overcome. Obviously we have a continuous job that has to be done.”

Writing By Axel Bugge; editing by Peter Graff

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