Much Ado about Nothing

As many readers will have heard or read through other media, the last few weeks have seen a political crisis emerge, develop and finally subside in Portugal. The plot has been a convoluted one, with much toing-and-froing and backtracking, as well as attempts to change the game altogether – but all it came down to in the end was next to nothing. Anyway, now that none of the key players seem to have any cards left to play in the immediate future, it seems like a good time to summarise the events which took place throughout the month of July.

Act 1.
The proximate cause of this political crisis was the resignation of the former Minister of Finance, Vítor Gaspar, on July 1st. Mr Gaspar, a technocrat, was the chief domestic ideologue and implementer of austerity and an all-powerful figure in the centre-right coalition government. His resignation immediately brought on a political earthquake because instead of claiming personal reasons and quietly leaving the stage (as is the standard practice in these cases), he was candid enough to write a public letter of resignation in which he acknowledged the failure of the strategy that has been adopted thus far. Then, on the following day, Paulo Portas, then Minister of Foreign Affairs and leader of the junior coalition partner (the Popular Party, or CDS-PP), seized the opportunity to tender his own resignation from the government. His allegedly irrevocable decision was driven by strictly tactical political considerations: up until now, his party has succeeded in playing a duplicitous role whereby it actively supports austerity measures while simultaneously criticising them in public for leaving insufficient room for “the economy”. As a result of this Janus-faced strategy, the CDS-PP has managed to maintain its poll ratings at around 12% even while the senior coalition partner, the PSD, has been plummeting in the polls (from 39% in the June 2011 elections to 25% at present). However, as even tougher times lie ahead (with the Troika demanding additional permanent budget cuts worth around 3% of GDP in the near future), and with local elections coming up in September of this year, Mr Gaspar’s resignation (and the alleged appointment of a new minister of finance by the prime minister without consulting with the junior partner) seemed like a good opportunity for the CDS-PP to leave the government and avoid the electoral erosion that would surely come about in the next few months.

Act 2.
The resignations of both Mr Gaspar and Mr Portas seemed to signal the government’s imminent downfall, but in fact the play had barely begun. The prime minister, Pedro Passos Coelho, responded by refusing to accept Mr Portas’ public resignation and offering to negotiate. In return for the continuing support of the CDS-PP, Mr Coelho offered the junior coalition partner the leadership of the negotiations with the Troika and control over economic decision-making, in addition to offering to appoint Mr Portas as “Deputy Prime Minister” (a hitherto-inexistent post). This was too much for a party worth 12% of the electorate to turn down, even at the cost of future electoral erosion, so Mr Portas backtracked on his “irrevocable” decision, and the cabinet reshuffling was publicly announced and officially proposed to President Cavaco Silva (who also hails from the PSD). Then, as analysts argued over whether the president would simply confirm the reshuffling or refuse to condone the change in the balance of power in favour of the CDS-PP (thus bringing down the government and calling an early election); Mr Cavaco Silva surprised everyone by attempting to change the game altogether. He refused to follow either option and instead called for broad-based discussions to be held between both coalition partners as well as the main opposition party (the Socialist Party, or PS), with a view to the signing of a “national salvation pact” which would commit all three parties to endorsing austerity regardless of the outcome of the next general election (which would be anticipated by a year to coincide with the formal conclusion of the Troika’s period of supervision in June 2014). Mr Cavaco Silva was thus offering the socialists the opportunity to move into power one year ahead of schedule in return for their formal commitment to maintaining the same political course as the current government.

Act 3.
The president’s surprising proposal was an attempt to set a booby-trap for the socialists. If the latter refused to negotiate, they could be accused of adopting an irresponsible and uncompromising stance in the face of national emergency; if they agreed to endorse the “national salvation pact”, they would be decisively compromised in their ability to simply carry on waiting for the government to fall, and contestation within the party itself would increase significantly. Therefore, it was quite obvious that accepting such a proposal would amount to political suicide on the part of the PS – so what followed was a week of mock negotiations, supposedly leading up to the signing of a pact that at least one of the concerned parties had really no interest in. Eventually, the various parties announced that the negotiations had come to nothing, and did their best to blame each other for the outcome. And the President, whose move failed to bring about the desired results, ended up confirming the cabinet reshuffling that had been proposed a week before and withdrawing the promise of an early general election in September 2014.

The ultimate cause of this political crisis was, of course, the country’s ever-worsening economic and financial situation and the increasingly obvious fact that austerity is spreading social and economic destruction without even bringing public finances under control. As the political fall-out from all this becomes increasingly imminent, cracks have begun to emerge in the ruling coalition and in this instance these were only overcome at the cost of offering the junior coalition partner effective control over economic policy (though this will change nothing of substance). The president seized the opportunity to try and tie the main opposition party to the same pro-austerity course of action through a formal long-term pact, but this was an ill-considered move that had little chance of succeeding. The final outcome is a government whose credibility and popularity, which were already in shambles, have been additionally shaken and whose downfall was only temporarily postponed through offering vastly increased powers to the junior partner. Given that the economic and financial strategy will remain virtually unaltered, the social, economic and political situation will continue to deteriorate, so sooner or later a new crisis will erupt. For the time being, however, it was really much ado about nothing.