Thrifty newcomer may be just the ticket in profligate Portugal

Pedro Passos Coelho, Portugal’s prime minister-elect, does not like wasting money. Both in his professional career and personal life, he has been described as thrifty, frugal, even tight-fisted. He currently lives in a standard apartment block in the none-too-fashionable Lisbon district of Amadora, but if he moves into the prime minister’s residence near the São Bento Palace his stinginess may come in handy in solving Portugal’s debt and deficit crisis.

That, at least, appears to be what many Portuguese were thinking when they handed victory to Passos Coelho’s centre-right Social Democrats (PSD) in last Sunday’s general election, coupled with a desire to get rid of the Socialist government of outgoing Prime Minister José Sócrates, blamed – rightly or wrongly – for Portugal’s current predicament.

The election, called early after Sócrates resigned in March, was run almost entirely on the issue of how best to implement reforms to lower Portugal’s debt burden and slash public deficits that have forced the country to seek a €78-billion bailout from the European Union and the International Monetary Fund. Having already suffered unpopular austerity measures – from public sector pay freezes to pension cuts – under Sócrates with so far little to show for it, voters appeared willing to take a gamble on Passos Coelho, whose plans are even more drastic, and, in the short-term at least, may prove even more painful.

The PSD plan to implement the bailout goes further in some cases than the measures demanded by the IMF. It includes tax increases, pension reductions, and long-term economic reforms such as dramatically trimming the civil service and privatizing many industries, including (at least partially) Portugal’s one public bank.

“I want to guarantee to those who are watching us from abroad that Portugal does not intend to be a burden for the future to other countries that lent us the means that we needed today to face up to our responsibilities,” the PSD leader said Sunday night as his victory looked increasingly certain.

Though he has relatively little experience in politics, having spent most of his career in discreet executive roles in low-profile companies, Passos Coelho appeared able to convince voters that painful reform would lead to a cure for Portugal’s economic ailments. And he interpreted the PSD’s 39-percent share of the vote as a mandate to enact his plan.

“It’s going to be hard. But it’s going to be worth it,” he said on Sunday.

Though the PSD’s share was higher than many opinion polls and analysts had predicted, it is not enough by itself to form a majority government, forcing Passos Coelho to establish a coalition with the conservative CDS, which picked up 12 percent.

The Socialists won 28 percent, their worst performance in two decades. Sócrates was quick to concede defeat, and took full responsibility as he stepped down as leader of the party.

Taking the blame

“This defeat is entirely mine and I want to assume full responsibility for it. I feel it is necessary to open a new political cycle that is able to prepare a consistent alternative. I want to give the Socialist Party the space to discuss its future and select a new leadership,” he said Sunday.

Passos Coelho should face few difficulties forging a coalition with the CDS but two obstacles loom large and imminent.

One is that some of the structural reforms agreed with the EU and IMF will require changes to the country’s 1975 constitution. Implementing them will take time as changing the constitution requires a two-thirds majority in parliament, which will force the PSD and CDS to garner support from disgruntled Socialists. The other problem is that constitutional rules mean the new government is unlikely to take office before the end of June, just days before deadlines for some of the austerity measures agreed with the EU and IMF start falling in early July.

Passos Coelho does not have much time to start saving money.