[PINR] 23 December 2004: Portugal's Dilemma: Reform or Social Defense

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Power and Interest News Report (PINR)
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23 December 2004
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Portugal's Dilemma: Reform or Social Defense

Drafted By: Dr. Michael A. Weinstein
http://www.pinr.com

With the weakest economy in the European Union's western core, Portugal is now in the throes of what analysts call a political "crisis" that reflects the difficulties of its structural adjustment to E.U. standards.
Since its "Carnation Revolution" in 1974, when left-wing military officers eliminated the last vestiges of the Salazar dictatorship and disbanded the country's African empire, Portugal has stabilized as a parliamentary democracy dominated by the left-center Socialists and the right-center Social Democrats, both of which are committed to maintaining Lisbon's good standing in the E.U. Over the last three decades, the country has modernized in fits and starts, in which periods of rapid development have alternated with periods of stagnation and dispersion.
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The Economic Context of Political Instability

After a spurt of economic growth and infrastructure modernization in the late 1990s, Portugal's economy has recently subsided and contracted. During 2003, G.D.P. per capita decreased by one percent, unemployment has recently risen to 6.8 percent and the public deficit is now approximately five percent, far above the E.U.'s limit of three percent of G.D.P. In 2001, Portugal became the first state in the E.U. to exceed that deficit ceiling.
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The Run-up to "Crisis"

The political consequences of Portugal's underlying structural weaknesses date to July 2004, when Premier Jose Manuel Durao Barroso resigned to become the head of the European Commission. At that time, Sampaio could have called new elections, as his Socialist Party requested, but he decided instead to ask the Social Democrats to form a new government under Santana Lopes' leadership.
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The Fall of the Center-Right Coalition

After summoning Santana Lopes for consultations on November 29, Sampaio dissolved parliament the next day, citing -- according to presidential spokesman Joao Gabriel -- the Premier's inability to "mobilize Portugal and the Portuguese in a coherent, disciplined and stable manner." Sampaio's decision was taken at a time when opinion polls showed that the Socialists had the support of 49 percent of the voting public to theSocial Democrats' 32 percent, and Portugal's central bank publicly opposed Santana Lopes' plans to cut taxes and raise wages and pensions.
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Conclusion: Reform versus Social Defense

Whatever the results of the February "snap elections" -- whether the usual coalition or minority government, or a Socialist majority -- the next administration in Lisbon will be faced with Portugal's persisting problem of navigating pressures for market reform and budget austerity from the E.U. and financial organizations, and popular demands for economic security in the face of stagnation and recession. Caught between two jealous masters, Portugal's political leadership will be put to a daunting test, because it does not seem possible to forge a compromise or to satisfy one of the claimants except at the expense of the other.
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complete report available at http://www.pinr.com
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Report Drafted By:
Dr. Michael A. Weinstein
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The Power and Interest News Report (PINR) is an analysis-based publication that seeks to, as objectively as possible, provide insight into various conflicts, regions and points of interest around the globe. PINR approaches a subject based upon the powers and interests involved, leaving the moral judgments to the reader. This report may not be reproduced, reprinted or broadcast without the written permission of [e-mail]. All comments should be directed to [e-mail].

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