By Tom Gill
Portugal is preparing for an early general election after Prime Minister Antonio Guterres resigned in response to heavy losses in local government elections. His decision to step down after six years in power signals the end of an era of market-friendly socialism in which Portugal focused on joining the European single currency.
The socialists’ defeat in last Sunday’s municipal elections, which came as the opposition Centre-Right Social Democrats made strong gains, reflected a sharp fall in Guterres’s popularity ratings over the past year.
‘Economic growth has decelerated and spending cuts have hit public services. Wage rises have also been outstripped by inflation. A downward pressure on pay-packets is set to continue as commitments to the European Union’s austere Growth and Stability Pact public finance targets means public-sector union demands for a 6 per cent increase next year will be refused in a bid to cut state expenditure. This will depress real wage increases generally, as public-sector pay deals set a benchmark for the private sector.
Job losses and pay restraint will make it more difficult for Portuguese families to pay off heavy debts, which amount to 100 per cent of disposable income. They borrowed enthusiastically to buy consumer goods over the past five years as falling interest rates in the wake of closer European monetary integration tempted them to abandon a traditional propensity to save.
Workers are also concerned about the future direction of the EU, which will bring in east European countries where workers are better qualified and lower paid than in Portugal.
Enlargement will lead to a big cut in EU cohesion fundsafter 2006, when most aid will be channelled to the new, poorer entrants. The country’s peripheral location compared with east Europe’s proximity to the big markets of northern Europe also threatens investment and jobs. So, too, do new world trade liberalisation agreements that will expose Portugal’s main traditional industries — clothing, textiles and footwear — to increasing competition from low-cost developing countries.With a defeated Guterres standing down as party leader, socialists are now asking whether it is time that the “modernising” drive of the past decade should be ditched in favour of more radical policies
Guterres’s delivered advances for working people with the introduction of a minimum income for poor families, a national network of nursery schools and a large increase in university places. But he also privatised state-owned companies, pioneered private-sector management of state hospitals and brought in private finance for big infrastructure developments.
By strongly backing the Social Democrat Party (PSD), which took 144 mayors’ offices against the socialists’ 98 and the opposition communists’ 27, “Portugal has voted for change”, said PSD leader Jose Manuel Dura Banos.