With all the excitement around the Volkswagen affair, the refugee crisis and UK Labour’s return to socialism, the euro crisis has been relegated from the front pages. (It is still ongoing.)
But at last, there are positive signs of a change. Last weekend, the Portuguese returned the reformist centre-right government of Prime Minister Pedro Passos Coelho to power, albeit robbed of its previous absolute majority.
It was an election with obvious domestic implications for Portugal. However, the Portuguese election has significance beyond this smallish South-Western European country. It could indicate how neighbouring Spain might vote in December, and it sends a strong message to Greece.
Ever since Portugal received its eurozone bailout in 2011, the political debate has been dominated by the fight between the pro-reform and the anti-austerity camps. It was a debate similar to those raging in other European nations. Naturally Portugal watched with interest at what happened in Greece after Syriza’s election victory in January this year. It so happened that the Portuguese could observe how the EU dealt with Greek Prime Minister Alexis Tsipras’ demands – and they could then imagine how it would respond to similar developments in Portugal.
Initially, the Portuguese opposition had sided with Tsipras’ approach. When Greece rejected further austerity in the June referendum, Portuguese opposition leader Antonio Costa praised the result as if he had just won an election himself. Costa obviously felt encouraged that he might achieve something similar.
The ensuing economic and political chaos in Greece dampened his optimism quickly. Despite the Greek referendum, the eurozone remained firm and did not give in to Greece’s demands. This forced the Tsipras Government to close the banks, introduce capital controls and eventually surrender to the EU’s diktat. That’s hardly the fate any Portuguese politician would like to suffer.
The Portuguese opposition tried to limit the damage by distancing itself from Tsipras. In an election debate, opposition leader Costa claimed that “Syriza adopted the wrong strategy”. Though still calling for an end to austerity, Costa now denounced the Tsipras Government for its confrontational stance with the EU – as if negotiations would have brought about a different result.
Meanwhile, the way things played out in Greece was a gift to Prime Minister Passos Coelho. Afraid that any concessions would play into the hands of his own opposition, he had always been one of the staunchest allies of the German government in remaining tough on austerity conditions for Greece.
Tsipras’ erratic style of government was a gift to Passos Coelho’s election strategy. All that he had to do was draw the parallels between Greece’s travails and what might happen with a change of government in Portugal. Ironically, the conservative Passos Coelho could not have hoped for a better campaign assistant than the socialist Greek Prime Minister.
The Portuguese Prime Minister’s strategy worked. On Sunday, the alliance led by his Social Democratic Party (which, despite its name, is a centre-right party) won 37 per cent of the vote. That was a loss of 13 percentage points compared to the last election in 2011, but still enough to leave Antonio Costa’s Socialist Party behind on 32 percent.
It is remarkable that Portuguese election did not lead to radicalisation. After many years of economic crisis, Portugal is still battling enormous challenges.
Since the beginning of the global financial crisis, Portugal has lost half a million (mainly young) people to migration. For a country of only 10 million, this is a dramatic development. It is understandable though because the perspectives of the young generation have been bleak for a long time (Sad songs from Portugal, 21 April 2011). And so these young Portuguese have left their home searching for better opportunities either in more prosperous Western Europe countries – or indeed in Portugal’s former colonies of Angola, Mozambique or Brazil.
At least the tough economic reforms of the Passos Coelho government are slowly paying off. Economic growth has returned, unemployment has fallen from a peak of 17.5 percent to just under 12 percent, government debt is still high at 130 percent of GDP but the deficit is gradually being reduced.
With Passos Coelho’s coalition being returned as the strongest political force, there is hope that this positive development could be continued. However, he faces two problems. First, he either needs another coalition partner or he could try his luck as leader of a minority government. In both cases, he would find it harder to continue his austerity course. In all likelihood, it will be watered down. Second, Passos Coelho will not be able to claim a great mandate. Not only has he lost a substantial share of the vote, the election also produced a record low turnout of only 57 per cent.
Governing Portugal will thus not become any easier in the new parliament. And yet there is a good chance that the country will continue its path of austerity and economic reform. This is the signal that the Portuguese election sends to the rest of Europe.
Spain will go to the polls on December 20. Earlier this year, the Podemos protest movement rode high in the polls, but the Spanish have also watched the troubles that Greece’s Syriza government encountered when challenging the EU’s bailout conditions. This has already dampened Podemos’ electoral appeal, and the Portuguese result might indicate that the time of radical anti-austerity parties is over.
To Greece, the signal from Portugal is equally strong. The Portuguese also had to endure tough reform measures and yet they did not get radicalised in the process. Nor did they go on a confrontation course with the rest of the EU but they quietly kept reforming their economy. As a result, they are now beginning to reap the rewards. Anytime that Greek Prime Minister Tsipras is now asking for further favours from his European colleagues, they might just point to Portugal.
There are still enormous challenges ahead of Portugal, and the election result means that governing the country will be harder than before. Having said that, it remains a hopeful signal that even tough economic reforms and fiscal austerity may not always lead to a radicalisation of politics, and that such reforms will eventually pay off.
Among all the bad news we usually hear from Europe, this is one that at least contains a glimmer of hope.