Seeking to Repair a Rift in Portugal’s Ruling Coalition Threatened with the collapse of his government, Pedro Passos Coelho, Portugal’s prime minister, promoted on Saturday the head of the junior coalition party to be his deputy. Mr. Passos Coelho told a news conference that his conciliatory gesture amounted to a “a solid and far-reaching agreement,” which would “ensure indispensable political stability.” The peacemaking deal was the latest twist in a frantic week of politics in Lisbon, after two ministers unexpectedly resigned in two days, leaving the government teetering on the brink of collapse. As a result, Portuguese financial markets slumped midweek, with the turmoil in Lisbon also sending shock waves across Europe by reviving concerns among investors over whether Portugal and other ailing euro economies would stick to reform programs agreed with international creditors. As part of the cabinet reshuffle unveiled Saturday, Paulo Portas was appointed deputy prime minister, in charge of coordinating economic policies and relations with Portugal’s international creditors. On Tuesday, Mr. Portas had announced his “irrevocable” resignation as foreign minister, a day after Vítor Gaspar, the finance minister, quit. Maintaining the support of Mr. Portas was crucial to the survival of the government because he is also the leader of the conservative Popular Party, the junior partner in the center-right coalition led by Prime Minister Passos Coelho that swept to power in a general election in June of 2011. While the timing of his resignation came as a surprise, Mr. Portas had already created tensions within the government coalition by distancing himself from some of its austerity measures. The country has been stuck in one of Europe’s longest and most severe recessions and the Portuguese have held street protests and strike actions against tax increases and spending cuts. Following Saturday’s cabinet reshuffle, Mr. Passos Coelho said that it was essential for Portugal to “enter a new economic cycle.” Mr. Portas also won on Saturday another concession for his party with the appointment of António Pires de Lima as economy minister. Smoothing relations within the government could still prove tricky, however, following the appointment earlier this week of Maria Luís Albuquerque as the new finance minister, a choice that Mr. Portas openly criticized. The political changes in Lisbon come as officials from the so-called troika of international creditors — the European Commission, the European Central Bank and the International Monetary Fund — are about to start a review of the country’s economic progress on July 15. In May 2011, Lisbon negotiated a bailout with the creditors worth 78 billion euros, or $100 billion, linked to a reform program that was meant to increase its economic competitiveness and end in June of next year. On Friday, Standard & Poor’s, the credit rating agency, revised the outlook to negative from stable for Portugal’s long-term debt, warning that “growing political uncertainty could derail Portugal’s forthcoming debt issuance and its hoped-for exit in 2014 from the troika-sponsored support program.” But after healing the rift with Mr. Portas and his junior coalition partner, Mr. Passos Coelho insisted Saturday that Portugal remained on track to end the program next year, as scheduled and “without drama.”
Posted on: Sun, 07 Jul 2013 04:04:29 +0000
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