Portugal’s new Socialist party manifesto released today has sent shockwaves straight to Germany where the most powerful nation in the union was relying on Portugal to buckle down and play the game of decades of interest payments and central supervision.
With the Greek problem much in Bonn’s sites, any anti-austerity behaviour from junior EU members, especially those with socialist pledges in an anti-austerity election manifesto, causes deep concern that Portugal may follow Greece out of the Euro or, if not, Portugal's lack of financial controls under the Socialists will make a mockery of the whole scheme.
Not only does the Socialist Party’s new manifesto reject austerity, it also calls a halt to the reduction of the civil servant headcount and an increase in public spending.
With Socialists leader António Costa’s anti-austerity battle cry of "We will carry out a reverse policy,” he today released his long awaited 20 point plan to retake Portugal’s fiscal independence and to rebuild the already vast public sector into his socialist vision of Utopia.
Costa said a comfortable majority of his party wants an end to the current obsession with austerity and if he wins the October election he will start to rebuild parts of the public sector and reverse the ‘drastic cuts’ made by the Passos Coelho coalition.
In fact the Coelho's cuts have been little more than window dressing to keep the Troika goons at bay as the PM realises that the recently unemployed are unlikely to vote for him, so has gone easy on those in the employ of the state.
In the opinion of today's Daily Telegraph, the Socialists are ahead in the polls and easily could form a coalition with the Communist or Left Bloc parties to create a left wing coalition, just the thing to spoil Merkel’s day and IMF Christine Lagarde’s year.
Despite Portugal’s current, rather tired and discredited government coalition claiming that all is well, all is not well as under its rule, debt has actually gone up, unemployment is still high despite 300,000 people leaving the country to find work elsewhere. The public seems now to have had enough of smarmy politicians and bankers helping themselves while the poor get poorer.
Costa will gain more votes by reversing or cancelling the privatisations that Passos Coelho’s team has pushed through, including that of state airline TAP where a winner from a narrow field of three is about to be announced.
Costa is planning an increase in healthcare spending as public hospitals lack medical staff and, in the Algarve, are managed by a director chosen for his robotic adherence to the ministry line rather than the needs of the patient, leaving hundreds of posts unfilled.
Under the Socialists, Portugal soon would break many EU and Troika imposed targets and barriers. There may be no option but either to rewrite the rule book, or for Portugal to leave the club.
Portugal is still being observed by the Troika but is not under its direct control so can borrow money on the international market, but at what rates under Socialist rule remains Costa’s Achilles heel.
Portugal's combined public and private debt is more than 370% of GDP, the worst in Europe which leaves the country badly exposed.
In the Daily Telegraph today, Citigroup calculates that Portugal’s debt ratios have already gone 'beyond the point of no return, warning that the country ultimately will need some form of debt-restructuring to wipe the slate clean.'
Where Greece goes, Portugal may follow if the Socialist Party wins the election.
The problem is that this news is cheering for many voters who have suffered under a cynical, cruel and automaton state machine that has stripped many of their means of economic survival and has no intention of helping them get back on their feet.
Many look back with fondness on the halcyon years of Socialist overspending under Soares and Sócrates and will welcome the change to a Costa-run government 'just to get shot of the current lot.'
