<nettime> Portugal's anti-euro Left banned from power

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Eurozone crosses Rubicon as Portugal's anti-euro Left banned from
power

http://www.telegraph.co.uk/finance/economics/11949701/AEP-Eurozone-crosses-Rubicon-as-Portugals-anti-euro-Left-banned-from-power.html

By Ambrose Evans-Pritchard, 4:30PM BST 23 Oct 2015


Portugal has entered dangerous political waters. For the first time
since the creation of Europeâs monetary union, a member state has
taken the explicit step of forbidding eurosceptic parties from taking
office on the grounds of national interest.

Anibal Cavaco Silva, Portugalâs constitutional president, has
refused to appoint a Left-wing coalition government even though it
secured an absolute majority in the Portuguese parliament and won a
mandate to smash the austerity regime bequeathed by the EU-IMF Troika.

He deemed it too risky to let the Left Bloc or the Communists come
close to power, insisting that conservatives should soldier on as a
minority in order to satisfy Brussels and appease foreign financial
markets.

Democracy must take second place to the higher imperative of euro
rules and membership.

âIn 40 years of democracy, no government in Portugal has ever
depended on the support of anti-European forces, that is to say forces
that campaigned to abrogate the Lisbon Treaty, the Fiscal Compact, the
Growth and Stability Pact, as well as to dismantle monetary union and
take Portugal out of the euro, in addition to wanting the dissolution
of NATO,â said Mr Cavaco Silva.

âThis is the worst moment for a radical change to the foundations of
our democracy.

"After we carried out an onerous programme of financial assistance,
entailing heavy sacrifices, it is my duty, within my constitutional
powers, to do everything possible to prevent false signals being sent
to financial institutions, investors and markets,â he said.

Mr Cavaco Silva argued that the great majority of the Portuguese
people did not vote for parties that want a return to the escudo or
that advocate a traumatic showdown with Brussels.

This is true, but he skipped over the other core message from the
elections held three weeks ago: that they also voted for an end to
wage cuts and Troika austerity. The combined parties of the Left
won 50.7pc of the vote. Led by the Socialists, they control the
Assembleia.

The conservative premier, Pedro Passos Coelho, came first and
therefore gets first shot at forming a government, but his Right-wing
coalition as a whole secured just 38.5pc of the vote. It lost 28
seats.

The Socialist leader, Antonio Costa, has reacted with fury, damning
the presidentâs action as a âgrave mistakeâ that threatens to
engulf the country in a political firestorm.

âIt is unacceptable to usurp the exclusive powers of parliament. The
Socialists will not take lessons from professor Cavaco Silva on the
defence of our democracy,â he said.

Mr Costa vowed to press ahead with his plans to form a triple-Left
coalition, and warned that the Right-wing rump government will face an
immediate vote of no confidence.

There can be no fresh elections until the second half of next year
under Portugalâs constitution, risking almost a year of paralysis
that puts the country on a collision course with Brussels and
ultimately threatens to reignite the countryâs debt crisis.

The bond market has reacted calmly to events in Lisbon but it is no
longer a sensitive gauge now that the European Central Bank is mopping
up Portuguese debt under quantitative easing.

Portugal is no longer under a Troika regime and does not face an
immediate funding crunch, holding cash reserves above â8bn. Yet the
IMF says the country remains âhighly vulnerableâ if there is any
shock or the country fails to deliver on reforms, currently deemed to
have âstalledâ.

Public debt is 127pc of GDP and total debt is 370pc, worse than in
Greece. Net external liabilities are more than 220pc of GDP.

The IMF warned that Portugal's âexport miracleâ remains narrowly
based, the headline gains flattered by re-exports with little value
added. âA durable rebalancing of the economy has not taken place,â
it said.

âThe president has created a constitutional crisis,â said Rui
Tavares, a radical green MEP. âHe is saying that he will never allow
the formation of a government containing Leftists and Communists.
People are amazed by what has happened.â

Mr Tavares said the president has invoked the spectre of the
Communists and the Left Bloc as a âstraw manâ to prevent the
Left taking power at all, knowing full well that the two parties
agreed to drop their demands for euro-exit, a withdrawal from Nato
and nationalisation of the commanding heights of the economy under a
compromise deal to the forge the coalition.

President Cavaco Silva may be correct is calculating that a Socialist
government in league with the Communists would precipitate a major
clash with the EU austerity mandarins. Mr Costaâs grand plan for
Keynesian reflation â led by spending on education and health â is
entirely incompatible with the EUâs Fiscal Compact.

The secretary-general of the Portuguese Socialist Party, Antonio
Costa, during his speech after the results that give the victory to
the PSD - CDS/PP coalition, Lisbon, Portugal, 04 October 2015

This foolish treaty law obliges Portugal to cut its debt to 60pc of
GDP over the next 20 years in a permanent austerity trap, and to do it
just as the rest of southern Europe is trying to do the same thing,
and all against a backdrop of powerful deflationary forces worldwide.

The strategy of chipping away at the countryâs massive debt burden
by permanent belt-tightening is largely self-defeating, since the
denominator effect of stagnant nominal GDP aggravates debt dynamics.

It is also pointless. Portugal will require a debt write-off when the
next global downturn hits in earnest. There is no chance whatsoever
that Germany will agree to EMU fiscal union in time to prevent this.

The chief consequence of drawing out the agony is deep hysteresis
in the labour markets and chronically low levels of investment that
blight the future.

Mr Cavaco Silva is effectively using his office to impose a
reactionary ideological agenda, in the interests of creditors and the
EMU establishment, and dressing it up with remarkable Chutzpah as a
defence of democracy.

The Portuguese Socialists and Communists have buried the hatchet
on their bitter divisions for the first time since the Carnation
Revolution and the overthrow of the Salazar dictatorship in the 1970s,
yet they are being denied their parliamentary prerogative to form a
majority government.

This is a dangerous demarche. The Portuguese conservatives and their
media allies behave as if the Left has no legitimate right to take
power, and must be held in check by any means.

These reflexes are familiar â and chilling â to anybody familiar
with 20th century Iberian history, or indeed Latin America. That it is
being done in the name of the euro is entirely to be expected.

Greeceâs Syriza movement, Europeâs first radical-Left government
in Europe since the Second World War, was crushed into submission
for daring to confront eurozone ideology. Now the Portuguese Left is
running into a variant of the same meat-grinder.

Europeâs socialists face a dilemma. They are at last waking up
to the unpleasant truth that monetary union is an authoritarian
Right-wing enterprise that has slipped its democratic leash, yet if
they act on this insight in any way they risk being prevented from
taking power.

Brussels really has created a monster.




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