October 05, 2015


Passos Coelho wins, but no majority in parliament

Our main story today are the Portuguese elections. Please note we have not economic data today, due to technical problems.

The coalition of PSD and CDS won the elections but failed to win a majority in parliament. The ruling coalition received 38.34% against 32.38% for the Socialists. This translates into a total of 104 deputies for the ruling coalition, far from the 116 needed for a majority in the 230-seat parliament. These Portuguese government's results from the full count for domestic precincts, which elect 226 seats of the 230, is:

PàF38.34%104centre-rightPSD/CDS coalition
BE10.22%19radical left
CDU8.27%17green leftCommunist/Green coalition
PAN1.39%1animal rights

The biggest winner and a surprise given the pre-election polls, was the Left Bloc (BE), which increased its share of the votes to 10.22%, doubling their number of deputies in parliament to 19 to become the third strongest party. The traditional Communists (CDU) obtained 8.27%, and 17 deputies. Both, Left Bloc and Communists, put pressure on Antonio Costa not to led the PSD/CDS form a government, according to Diario Economico. Both parties strongly oppose Portugal’s membership to the euro, saying they would not support a minority government under Passos Coelho.

Adding up the numbers, theoretically we have two constellations for a minority government, the centre-right coalition and a coalition of the Socialists with the Left Bloc (the Communists already said they won't participate). The foreign vote, determining the remaining 4 MPs, could be decisive if the either of the PS or CDS-led coalitions get at least three, though this seems rather unlikely as the 4 seats are elected in two 2-seat districts, for Europe and for the rest of the world. An alliance between Socialists and the Left Bloc is, however, also not evident, as the Socialists seem to have more in common with the ruling coalition when it comes to eurozone membership or fiscal targets than with the Left Bloc.

If the president were to ask Passos Coelho to form a government, he would be the first leader to be reelected in Europe despite harsh austerity measures, as many in the press already pointed out this morning. It will certainly become part of the success narrative about bailout programmes. The coalition also won against what the polls predicted only months ago, when none of them predicted a victory. But the two parties lost heavily compared to the 2011 elections where they got together 50.4% of the vote and 129 deputies. In terms of votes, the two parties lost a total of 738,301 votes, down to about 2.06m.

The prospect of a minority government makes for an unstable outlook for Portugal. The extent will depend on the Socialists and whether, in opposition, they will harden their stance under pressure from the Left Bloc. Antonio Costa said the Socialists would not team up with more radical parties to form a “negative majority” against the minority government, the FT reports. But Costa is under pressure from inside and outside his party. Costa said that they won’t support policies that go against the Socialists and that a large majority of the Portuguese in fact voted for change. He also insisted he will not resign. 

Passos Coelho said that they will make the necessary compromises to ensure a stable government for the next four years. In his carefully calibrated victory speech, he talked about recovery of income, progressive abandonment of austerity measures and recovery of public-sector wages in the context of the 2016 budget. He announced to develop parliamentary initiatives with the Socialists. Both the Socialists and the coalition share their commitment to the euro and to meet the fiscal targets of the bailout programme. 

Domestic participation was 56.93% or under 5.4m of over 9.4m registered voters. Abstention was 43.07% or under 4.1m people.

Our other stories

We also have stories on the macroeconomic consequences of VW, of the sharp fall in producer price in August, on a really gloomy outlook by Peter Praet, on why the ECB is an employer from hell, on the list of 48 actions, on an increase in the estimate of the number of refugees; on Spain's budget, on long-term unemployment in Spain, and the Podemos-clause in financial contracts.

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