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What the Left Should Do in Portugal

Riding a narrative of stability and economic growth, the center-left won elections in Portugal yesterday. But the country’s recovery is precarious. We need to push for a total break with austerity.

Portugal's prime minister Antonio Costa arrives ahead of a European Council meeting on Brexit at the Europa Building, European Parliament on April 10, 2019 in Brussels, Belgium. Leon Neal / Getty

Portugal held national elections on Sunday after four years of an unusual governmental solution known as the contraption (geringonça), drawn up in 2015 by the social-liberal Socialist Party (PS), the Left Bloc (BE), and the Portuguese Communist Party (PCP).

To the surprise of many observers, this parliamentary agreement did prove able to sustain itself for a full term —PS premier António Costa went into the vote championing his party’s record as a force for “stability.” Responding to advances for his party in Sunday’s contest, he suggested the possibility of another such pact for the next term.

Yet if many on the international left consider the “pluralism” of the Portuguese government a model, this unusual solution (in which the Left Bloc and the Communists gave their outside support to the Socialists) was, in fact, a response to the very particular context emerging in the postcrisis period. And as yesterday’s election results showed, it is not necessarily a sustainable one.

Over the last four years of geringonça the center-left PS has been able to revitalize its image, thanks to a limited set of progressive social policies. Yet — in tandem with this party’s advance — the debate over the big structural problems facing the Portuguese economy is far weaker now than it was in 2015. Whatever the popular perceptions of the geringonça’s successes over the last four years, the Left’s potential leverage over the next government has, in fact, clearly been reduced.

The Results

There are three main takeaways from Sunday night’s results. The PS was the clear winner, the Right was the clear loser, and Portugal again faces a situation in which the election result does not clearly indicate the makeup of the next government.

In Sunday’s vote the PS was the biggest party on 36.7 percent of the vote, up from 32.4 percent in 2015, securing it another twenty seats in parliament. Indeed, its 106 MPs place it just ten seats short of an absolute majority. Less good were the results for the other parties of the geringonça. The Left Bloc fell back from 10.2 to 9.7 percent, losing around 57,000 votes, but maintained all its nineteen MPs, whereas the CDU (the electoral coalition of the PCP and the Greens) fell from 8.3 to 6.5 percent, losing 115,000 votes and five of its MPs.

Results were similarly bad for the PS’s rivals on the right wing of Portuguese politics. The center-right PSD went from 36.9 percent in 2015 (when it ran together with the conservative CDS) to 27.9 percent alone. Together, these parties lost twenty-five seats in Parliament. The other big winners were the liberal environmentalists of PAN, who took four seats (rising from 1.4 to 3.3 percent).

The results were also marked by the arrival in parliament of three new parties, which each scored slightly over 1 percent and one MP each: Liberal Initiative (a new liberal party) but also Chega (the first far-right populist party in parliament), and Livre (a social-democratic party related to Yanis Varoufakis’ Diem25, and the first party to stand a black woman as its lead candidate). The fact that the historic breakthroughs for these latter parties coincided points to the political tensions of a country with both renewed racist tendencies and new anti-racist movements. This is the most diverse parliamentary composition in Portugal’s recent history. But the vote also pointed to a downturn in voter engagement — there was 45.5 percent abstention, up from 43 percent last time out.

The reaction of the left-wing and center-left leaders to the results point in the same direction, but with different undertones. Outgoing prime minister and PS leader António Costa insisted that the former governmental solution has popular support and that voters want it to continue but with a stronger PS. Here he focused on the idea of political stability, prolonging the present solution but strengthening his own party’s place therein. He also stated that he was willing to enlarge the Contraption with the inclusion of PAN and Livre.

Rui Rio, the leader of the center-right PSD, also stated that he would be willing to discuss the next government with Costa. Catarina Martins, BE’s leader, insisted on the party’s “availability” to negotiate both a full-term agreement as well as a yearly agreement (based on state budgets). Jerónimo de Sousa also asserted the PCP’s availability, but with a different twist: the Communists, the left-wing party most punished for its stances over the last four years, are willing to negotiate with the PS on a policy by policy basis. But in reality the electoral outcome opens a range of arithmetic possibilities, which will only become clear across the next few weeks.

Geringonça Revisited

However, the election result and the setbacks for the Left also pose the question — is the geringonça arrangement really such a model to follow? Much has been said about this governmental experience, but some numbers and arguments are worth reiterating. Firstly, this was not a government of the Left, but rather a social-liberal government that, with the Left’s parliamentary support, implemented some social policies. This understanding is central if we are to seriously engage with the political implications of this solution. What this means concretely is that it was a government which set out to pursue economic recovery after four years of intense austerity, but which never held an anti-austerity program.

We can, of course, point out important measures taken by the Socialist-led government, under pressure from the Left: the rise of the minimum wage and pensions, the restoration of public sector workers’ wages after previous cuts, the restoration of four days’ holiday and the thirty-five-hour working week for public-sector workers, the reversal of the privatization process in some public-transport companies, and social measures like free books for school students, cheaper monthly transport passes in urban areas, and better social protection for children and long-term unemployed workers.

These measures were, however, only possible due to the limited breathing space granted by the European institutions — a sort of reward for a country seen as a “good student” of following austerity measures, idealized as a success story in contrast to Greece. Only given to this government after the recognition that the state budget followed European rules, this breathing space was also a means of reinvigorating a dying traditional social-democratic party. The recovery was also aided by circumstantial — and hardly-sustainable — factors like a drop in the price of oil (decisive for an import-based economy), a rise in internal consumption (due to a small income rebound, as well as the end of the austerity narrative), and a rise in exports, including services such as tourism, which saw a notable boom.

But the truth is that no structural changes were achieved. Portugal is still one of the most unequal EU countries in terms of income distribution. It has an overbearing weight of indirect taxes, the wage share of GDP is still way below pre-crisis figures (at 61.1 percent) and despite the drop in unemployment from 12.4 percent in 2015 to 6.7 percent today, according to official figures (unofficial figures tell a more complex story), public sector employment is still below 2011 figures (down 37,706 people compared to 2011). Meanwhile the Troika labor laws were mainly left untouched, public investment reached its lowest level in Portuguese democratic history in 2016 and (as a share of GDP) still stands below pre-crisis levels. This translates into the extreme underfunding of services like health and education, a rise in precarious jobs, and more bailed-out banks not subject to public control.

Worryingly, a central question of the Portuguese public debate in 2015 — the centrality of the public debt — had by the 2019 campaign completely disappeared. This is because interest rates are only barely positive, and the quantitative easing program implemented by the European Central Bank (ECB) absorbed a large part of the debt. But the debt straitjacket is still overwhelming: it dropped from 130.6 percent of GDP in 2014 to 121.5 percent by the end of 2018— but imposes tight limits on any kind of democratic or sovereign fiscal decisions.

The last four years were also marked by an extreme housing crisis and a huge, cross-sector strike wave. All of means that the country is in fact even more vulnerable to outside economic disturbances than it was in the run-up to 2007–2008, due to its weaker banking system, low public investment, more precarious jobs, and the fact that strategic sectors of the economy have remained privatized. Portugal is not a success story, as some liberal outlets put it. It is rather more a story of compliance with European rules, which served to revitalize the EU’s own strength in a time of Brexit and contributed to the illusion that it is possible to break away from austerity within European constraints.

And Now What?

Indeed, the electoral campaign mainly avoided the central problems facing the country. There was no substantial debate over the financial system, the EU, the euro, or the debt. With everyone expecting a diverse parliament and hence the need to make deals, few sharp dividing lines were drawn. Parties were cautious on defining concrete red lines for a future governmental agreement.

It is, then, important to note that the Left — principally meaning the Left Bloc and the PCP — did not win, either in terms of reshaping the public debate or in terms of picking up electoral support. In fact, they lost in terms of voting percentage, their absolute number of voters and (in the PCP’s case) their seats in parliament. This means the relation of forces in negotiating a possible new agreement is even more unfavorable to the Left than was true in 2015. This is a key reason why a new edition of the geringonça — even if it was popularly perceived as a good experience — would leave the Left in a much more fragile situation than before.

The PS — like many of its European counterparts — is in fact the party that has done most to apply neoliberal policies throughout Portuguese democratic history, with the exception of the four years of the Memorandum in 2011–15, under the rule of the center-right PSD.

The reason why things were different under the geringonça was not a change in the PS’s very nature, but rather the fact it sought to revitalize itself in the name of avoiding “Pasokification” — the collapse of its Greek sister party after years of imposing austerity. Back in 2015, even after four years in which the right-wing coalition had imposed harsh austerity, the PS did not actually beat the ruling parties for first place. But yesterday’s result, with the clear strengthening of the PS, means that the political situation today is very different to the one in 2015. This is another reason why the Left can hardly now begin insisting on the kind of structural changes which it had no strength to impose over the last four years.

The arithmetic possibilities for a new government are multiple — and impossible to predict, for the moment at least. The fact that the Communist PCP seems to be drawing away from a renewed geringonça creates difficulties for the Left Bloc, which does not want to leave open a space for a left-wing opposition, led by the party with the strongest (if much-weakened) link to the organized labor movement.

Even the center-right PSD’s leader is willing to negotiate (in fact, even some of the central measures of the outgoing PS government like the labor law depended on right-wing votes, used to overwhelm the opposition from the Left). We should also not rule out the possibility of the PS adopting a line like that of its sister party in Spain, Pedro Sánchez’s PSOE. In this logic, the PS could refuse to make any concessions to the Left, seeking a scenario of political instability whereby it could head for fresh elections and bid for an absolute majority.

Precisely the trap here is that any party that rejects a possible agreement could find itself marginalized and, indeed, face temporary electoral setbacks. The PS has strengthened its position but knows that any wrong move could lead to a very uncertain situation. The process that starts on Monday will be about more than the concrete substance of the negotiations: it will be a “blame game” to decide whose fault it is if the negotiations do not work out. This is the situation the Left created for itself and in which it now finds itself trapped, with no clear resolution in sight.