Portugal: With anti-austerity deal, left throws out right-wing gov't

November 13, 2015

Union-organised demonstration outside Portugal's parliament on November 10.

A coalition of the parties of the Portuguese left — the Socialist Party (PS), the Left Bloc, the Communist Party (PCP) and the Greens (PEV) — won a motion of no-confidence in the parliament on November 10.

The motion brought down the short-lived Portugal Ahead alliance government of the conservative Social Democratic Party (PSD) and the neoliberal Democratic and Social Centre-People's Party (CDS-PP).

The vote was 123 to 107 in the 230-seat national parliament, with the one deputy from the animal rights party People Animals Nature (PAN) supporting the censure motion.

Portuguese President Anibal Cavaco Silva, whose October 22 decision to appoint the Portugal Ahead government was thereby overturned, must now decide whether to appoint PS leader Antonio Costa as prime minister or install some sort of caretaker administration until new elections can be called.

Any new vote would take place in June next year at the earliest. A presidential election is due in January and, under the Portuguese constitution, six months must pass before a newly elected president can call another national vote.

Cavaco Silva has become notorious since the October 4 Portuguese elections, after which he banned the PCP and Left Bloc from involvement in government. Yet if he refuses to appoint Costa as prime minister, he will guarantee eight months of social turmoil and worsen the right's chances of winning January's presidential contest.

The agreement

Therefore, Cavaco Silva is most likely to reluctantly appoint Costa to head a government based on agreements between the PS and the smaller left parties the president was desperate to keep out of power.

Nonetheless, that outcome is not certain: the defeated coalition of ex-prime minister Paolo Passos Coelho is combining with Portugal's economic and media elites to provide every imaginable pretext for continuing to block the PS leader.

On October 11, PSD vice-president Pedro Pinto said: “The agreement between the PS, PCP and Left Bloc hasn't got any cement, any coherence.” Local PSD MP Bruno Vitorino raged: “What exists on the left is a non-government”; PS leader Costa was “a trickster, a special effects man who has produced a shoddy contraption posing as a sustainable left solution.”

If Cavaco Silva finally yields, the incoming government will be a PS administration supported, but not joined, by the Left Bloc, PCP and PEV. The smaller left forces will guarantee government stability in exchange for the PS adding 70 extra measures to its election program.

The agreement is for the PCP, Left Bloc and PEV to be consulted on government budgets and to back it against censure motions from the PSD-CDS opposition. The agreement also contains a safeguard clause guaranteeing that no unforeseen shortfalls in budget revenue will lead to higher taxes on workers, or lower wages and pensions.

It does not exclude censure motions in the event of the PS government failing to carry its agreements out. But so long as it abides by the accord, it will have PCP, Left Bloc and PEV support. On this basis, it becomes difficult for Cavaco Silva to keep insisting the PS government would not be a “stable, coherent and credible” proposal.

For its part, the Left Bloc has not closed the door on joining the government in future, but that will require a more comprehensive agreement. Such an agreement would need to cover issues where it now disagrees with the PS, for example on debt restructuring and partial privatisation of the Portuguese state airline TAP.

Wages and welfare

The measures agreed on aim to reverse the impact of austerity policies introduced into Portugal as part of the 2011 “bail-out” agreement with the “Troika” of the European Commission, European Central Bank and International Monetary Fund.

The agreed measures cover four areas: raising the purchasing power of workers and people on welfare; recovering and strengthening labour rights; stopping privatisations; and easing the tax burden on the lower-paid and poor.

The minimum wage will rise from €505 to €600 a month over four years (a real rise of 10% on projected inflation rates), public sector wages will be restored and workers whose income falls beneath the poverty line will be granted a new Annual Wage Complement.

The tax burden on the lower-paid will be cut by abolishing their contribution to the Single Social Tax (TSU, a surcharge for funding the social security system) by 2017. For workers receiving less than €600, the basic social security contribution will also be cut.

To help cut the cost of living the agreement will:
• Gradually introduce free access to resources required to attend school, starting with a textbook exchange scheme;
• Eliminate ambulance fees for patients referred to hospital emergency departments, raise the generic drugs prescription quota to 30% and raise the number of university places in healthcare;
• Cut the consumption tax rate on restaurant meals to 13%, introduce a lower electricity tariff for 500,000 low-income families and restrict council rate hikes to €75 a year for low-value properties;
• End eviction orders arising from inability to pay debts to public authorities and allow the settlement of mortgage debt by surrender of the property to the creditor.

The value of pensions will be restored to pre-Troika levels, as will the child benefit and the “solidarity supplement” for older people living in poverty.

According to former Left Bloc leader and economist Francisco Louca, these measures will mean that “two million people will be better off. In contrast, the right wing had vowed to go ahead with a €4 billion cut in social security (€1.6 billion from freezing pensions, plus €2.4 billion in benefit cuts), as promised to Brussels.”

Other reforms and funding

Labour and union rights will be restored and strengthened through collective bargaining, the establishment of a National Program Against Casualisation and increased funding of the Work Conditions Authority. These measures will help fight against common abuses such as false subcontracting and phoney training schemes.

The agreement also ends the proposed privatisation of public transportation companies in Lisbon and Oporto, as well as to water company mergers presently being implemented against the will of local councils. Privatisation and outsourcing of public services will end and existing public-private partnerships will be subjected to independent evaluation.

The self-employed and small businesses will benefit from having their social security contribution obligations reckoned according to immediate past income, rather than the present fixed-rate fee system.

The package will largely be financed by raising the tax burden on those who can afford to pay. To help finance the social security fund, casualisation will be penalised by a new tax on companies that rely excessively on labour hire. Companies with large profits compared with the size of their workforce will also be hit with a new tax.

New income tax brackets will be introduced to improve progressive taxation. Perks for the rich and the big employers will be eliminated or cut back.

Still to come

Louca said, if implemented, the agreement will ensure “stability in people's lives, relief for pensioners, wage recovery, job protection and greater tax justice. Moreover, the resulting increase in demand will have an immediate positive economic reaction.”

What is missing? The problem areas the agreement could not touch, given the pivotal position of the PS, include Portugal's stifling debt burden and its chronic investment shortfall. Only a radical debt restructure, combined with a boost in public investment, can break the stranglehold of Portugal's economic stagnation.

The PS does not concede this, but at least there is agreement between the parties to set up a parliamentary working group to analyse the debt issue. Its reports should ensure that public debt becomes a more prominent theme in Portuguese politics. It could lead to the government coming under pressure to revive the Greek SYRIZA government's proposal for a European debt conference.

Of course, such a development will only be possible if the PS government is actually installed and its supporters expect it to abide by its promises. In such a scenario, the government will almost certainly get caught between the hundreds of thousands awaiting the implementation of its commitments and EU imperatives, especially Brussels' public deficit reduction targets.

The usual agents of financial blackmail will also operate — the share markets, the yields on Portuguese debt and the ratings agencies. To these we can add the rabid Portuguese commercial media (already in hysterical “Venezuela mode”), the PS right wing (now openly organising to overthrow Costa at the party's March congress) and a PSD-CDS frothing about “opposition without respite”.

On November 11, PSD Setubal MP Bruno Vitorino said: “We can't be afraid of getting out on the streets. The streets don't belong to the protest professionals, to those paid by our taxes to go on demonstrations.”

Left Bloc leader Jorge Costa summed up the outlook in a November 11 Esquerda.net comment piece: “For those who have benefited from the past four years, a government that starts to function under the banner of restoring incomes is an unmentionable heresy and an outright invitation to the righteous wrath of Berlin.

“It's precisely here that thebiggest threat to the majority agreement reached between the PS, PCP and Left Bloc lies — in the European war machine against social rights…

“From now on — and even more when European, employer and media pressure ramps up — a majority for the restoration of incomes depends on mobilisation. The people, pressing for the implementation of what has been agreed and for further advances, must again become lead actor … The journey begun on October 4 has hardly begun.”

[Dick Nichols is Green Left Weekly's European correspondent, based in Barcelona. A more detailed version of this article will be published at Links International Journal of Socialist Renewal.]

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