Current issues in Portugal

2009 was a peculiar year in Portugal, with the country focused on an ongoing electoral process as three general elections (European, national and local) took place within a short 4-month period between April and October 2009. At the same time, the impact of the economic downturn became more visible with a clear increase of unemployment figures and of the number of companies becoming insolvent.

The political landscape has also suffered a slight, but significant, change. After having lost the European elections in June 2009 to the main opposition party (centre-right PSD), the Socialist Party managed to win the national elections in September 2009, although without a majority in the parliament, as was the case during the five preceding years. In the absence of real conditions for the setting-up of a coalition government, the Socialist Party and Prime Minister José Sócrates were “forced” to form a minority government and to negotiate the budget for 2010 (which was finally approved at the end of April) and the new Stability and Growth Programme .

Public debate in Portugal remains very largely focused on the economic crisis and on the measures which are currently being adopted in the framework of the SGP, following an agreement between the government and the main opposition party (PSD). The increase of taxes (VAT, tax revenues) and the severe cuts in the budget (affecting, in particular, social benefits) together with a rising unemployment rate and a generalised downgrading of Portuguese public debt by the main rating agencies are still in the newspapers’ front pages, although the economic indicators for 2010’s first quarter were a little better than expected. Recently, the Portuguese central bank reviewed its forecast for 2010, but already anticipates that 2011 will be a year of poor economic growth as a result of the severe constraints introduced by the ESP.

From now on, attention will be mainly directed at the evolution of the political scenario and, in particular, to the ability of the minority government to survive the current economic and social crisis in a moment where the coming presidential elections at the beginning of next year prevent any possible dissolution of the parliament. An increasing number of analysts predict that a major crisis will occur by the end of the year during the budget discussions, and some senior statesmen invoke the need for the two main parties (the Socialist Party and the PSD) to make a governmental coalition in order to establish a stable and durable solution which none of them seem to accept.

International matters are still dominated by concerns over the crisis and the effectiveness of the responses which were adopted. Although there is still room for matters of traditional interest to Portugal, like the traditional relationship with African Portuguese-speaking countries and Brazil, such matters tend to be eclipsed by the internal situation.

The reports focus on a reporting period from December 2009 until May 2010. This survey was conducted on the basis of a questionnaire that has been elaborated in March and April 2010. Most of the 31 reports were delivered in May 2010.

The EU-27 Watch No. 9 receives significant funding from the Otto Wolff-Foundation, Cologne, in the framework of the ‘Dialog Europa der Otto Wolff-Stiftung’, and financial support from the European Commission. The European Commission is not responsible for any use that may be made of the information contained therein.