Portuguese Government Wary of Repeating May's Snap Vote Mistake

(Bloomberg) -- Portugal’s minority Socialist government says it wants to complete its four-year term, rather than risk early elections as its support grows.

The Socialist Party had the backing of 41 percent of voters in a survey published by weekly magazine Expresso on Aug. 4, compared with just 32 percent in the October 2015 election. It led the opposition Social Democrats by 13 percentage points. Yet after U.K. Prime Minister Theresa May’s poll numbers tempted her into a disastrous snap election earlier this year, Portuguese leader Antonio Costa is inclined to play safe, reassured by the consistent support he’s enjoyed in parliament.

“Whoever provokes a political crisis in Portugal will pay severely,” Foreign Minister Augusto Santos Silva said in an interview at Bloomberg’s offices in Prague late on Monday. “The current government is deeply, fully committed to completing its term. Political stability is one of the key factors in the Portuguese success.”

Costa’s government has been backed by the Left Bloc, Communists and Greens, who had all challenged the moderate parties’ commitment to European budget rules in the past. But together they have reversed state salary cuts faster than the previous government had proposed, while increasing indirect taxes. The government aims to remove some measures introduced during the bailout program provided by the International Monetary Fund and the European Union that ended in 2014.

“There is a very impressive social resilience in our population,” Santos Silva said. “We had to cut salaries, to cut pensions, to create new taxes, and with no significant social turbulence. The traditional way of the Portuguese to cope with difficulties, based on family networks, on community networks, functioned perfectly during the crisis, and the crisis in Portugal was very, very severe.”

Tourism and exports have been helping the economy recover after the euro region’s debt crisis, with the Bank of Portugal forecasting growth will accelerate to 2.5 percent this year. Faster growth is helping the government manage the budget deficit, which last year was the narrowest in four decades of Portuguese democracy.

Santos Silva says he expects the government to reach an agreement with its allies in parliament to pass the 2018 budget proposal, due in October.

“The political success of the Portuguese government has to do with the ability to leave behind the most orthodox austerity, in terms of budgetary policy, without disrespecting any of our European commitments,” he said.

--With assistance from Peter Laca

To contact the reporters on this story: Michael Winfrey in Prague at mwinfrey@bloomberg.net, Joao Lima in Lisbon at jlima1@bloomberg.net.

To contact the editors responsible for this story: Vidya Root at vroot@bloomberg.net, Ben Sills, Eddie Buckle