Socialists ousted in Portugal election

Portugal’s opposition Social Democrats (PSD) won a conclusive victory in a general election on Sunday, paving the way for a new centre-right government coalition to implement the country’s €78bn bail-out programme.

The PSD had gained 39 per cent of the vote, against 28 per cent for the governing Socialists, late on Sunday with only a handful of small districts to count.

José Sócrates, prime minister for the past six years, conceded defeat and said he would resign as Socialist leader after the party’s worst election result for more than 20 years.

In an emotional speech to party supporters, Mr Sócrates said he would withdraw from frontline politics and not intervene in the choice of a new Socialist leader.

Pedro Passos Coelho, the PSD leader who will replace him as prime minister, said he would immediately seek to form a coalition government with the smaller conservative Popular party (CDS-PP).

The PSD and the CDS-PP, which gained close to 12 per cent of the vote, jointly won a comfortable majority of at least 126 seats in the 230-seat parliament. But the PSD failed to win an overall majority in its own right. Abstention was forecast at more than 40 per cent, the highest level to date in a general election.

Mr Passos Coelho, who has no previous government experience, faces the daunting task of implementing deep spending cuts and extensive economic reforms agreed with the European Union and International Monetary Fund against tight deadlines.

“We find ourselves in a terrible situation,” he said in a victory speech. But he added that he would seek to “go beyond” the EU-IMF programme to restore international confidence in Portugal.

Economists and business leaders are fearful that delays or hesitations in carrying out the programme would place Portugal in a similar situation to Greece, which is seeking an additional €60bn bail-out package to avert a forced debt restructuring.

Under the EU-IMF agreement, the incoming government is required to implement public spending cuts equal to 3.5 per cent of gross domestic product in 2012 and 2013 at a time when the economy is forecast to contract by 2 per cent both this year and next. Unemployment is already at a record level of 12.6 per cent and projected to rise above 13 per cent next year, when Portugal is forecast to be the only European country in recession.

The next government will have to propose detailed austerity measures and meet several reform deadlines before the end of July, when representatives of the “troika” – the EU, IMF and European Central Bank – are due in Lisbon to assess progress with the bail-out package. Meeting initial deadlines could pose special difficulties as, under Portugal’s constitutional rules, a new government is unlikely to take office until the end of June. Paulo Portas, head of the CDS-PP, which is expected to become the junior partner in the new government, has suggested that MPs forgo their summer recess to work on new legislation.

The defeat of Mr Sócrates after six years in office means another election loss for the centre-left in Europe, leaving only Spain, Greece, Austria, Slovenia and Cyprus with socialist-led governments in the EU.

Mr Sócrates tried to resist following Greece and Ireland in asking for a bail-out, but was forced to seek a rescue in April after his minority government was voted down in a debate over austerity measures.

His resignation led to the calling of a snap election two years ahead of schedule.

The Socialists, PSD and CDS-PP have all signed up to the bail-out agreement. But Mr Sócrates has accused Mr Passos Coelho of using the package as a pretext for introducing the “the most radical rightwing programme ever proposed” in Portugal.

José Manuel Barroso, president of the European Commission, said the ballot was the most important in Portugal since the country’s first democratic elections following the end of 48 years of authoritarian rule in 1974.

After voting in Lisbon, Mr Barroso, a former Portuguese prime minister and PSD leader, said: “Given the economic and financial situation of the country, this election is really decisive.”