One striking fact that is evident from the Global Financial Crisis is that no ruling political party has the answer to how to restore their economic fortunes quickly. Across the globe, left and right leaning administrations have grappled with low business confidence, high unemployment, poor output, weak investment and anaemic growth and been unable to find “the solution”. In most cases when the disaffected electorate has gone to the polls, the incumbent administration has tumbled. In short, then, what drives the economy would seem to be business inertia rather than political or monetary policies (to a greater or lesser extent anyway).
The Portuguese people went to the polls on Sunday. Portugal was the third nation after Greece and Ireland to need to ask for an IMF/EU worth €78 billion which was granted with conditions attached designed to restore the nation to the economic straight and narrow. Naturally, the austerity package associated with the loan was unpopular with the Portuguese. The bailout expired in May of last year and Portugal returned to growth with a GDP expansion of 0.9% last year. Unemployment peaked at 17.3% and has fallen back to 13.5%, still significantly higher than the 10.7% level pre-debt crisis in 2009. The budget deficit has been reduced from 10% in 2011 and is projected to come in at under 3% this year – the convergence target for joining the Euro. The nation has been able to raise money on international markets at reasonable yields again (the inability of the then government to raise such funds necessitated the bailout in 2011 when yield on government bonds became unsustainable as the European sovereign debt crisis raged). Arguably, therefore, the bailout has worked, but the pain felt by average Portuguese citizens is not to be overlooked.
The result of Sunday's election sees the PM Pedro Coelho retain power with 36.8% of the vote, but that means his center-right coalition no longer enjoys a parliamentary majority. The main opposition party, the Socialists, polled 32.4%. The outcome looked unlikely a few months ago when the Socialists, promising an easing of austerity and boosted family incomes enjoyed a commanding lead. No minority Portuguese government has ever completed its mandate since the nation was restored to democracy in 1974.
