Portugal Goes to Greece?

Portuguese politics could tip into disarray Tuesday if a coalition of left-wing parties pledging a Keynesian spending spree unseats the center-right government. If you thought this year’s Greek crisis was entertaining, you might be in for a rerun.

   Voters handed a sort-of victory to Prime Minister Pedro Passos Coelho in Oct. 4’s parliamentary poll. His Portugal Forward coalition, with 38% of the vote, was the largest vote-getter, but his center-right coalition controls only 107 of 230 parliamentary seats in a minority government.

   Now the Left Bloc and Communist parties, which between them control 34 seats, have sniffed an opportunity, as have some members on the leftward end of the Socialist party, the main opposition bloc. Socialist leader Antonio Costa, who had previously ruled out such a coalition, relented this weekend and now is expected to join a no-confidence vote Tuesday to unseat Mr. Coelho.

   The agreements reached over the weekend call for reversing all government-employee salary cuts mandated by the bailout deal; boosting welfare spending and raising the minimum wage; halting planned cuts to the corporate tax rate; and the renationalization of some companies that were privatized in recent years. The left claims the spending will pay for itself by boosting growth, but these were precisely the policies the led Portugal to crisis in the first place.

   This realignment is possible because Mr. Coelho wasn’t able to build a popular mandate behind his pledge to push forward with bailout-style policies now that Portugal has formally emerged from its European Union bailout program. Voters have suffered the bailout’s tax hikes while deeper liberalization remains a work in progress, even if the economy is at least growing again.

   Mr. Coelho bears responsibility for not offering voters a more convincing liberalization program either during his first term or on the campaign trail. But he also was limited by the tax-raising strictures Brussels imposed on the bailout deal. That’s given an anti-EU fringe the opportunity to seize the initiative.

   There’s a lesson here for the technocrats in Brussels: Voters won’t stand for austerity budgets if they aren’t compensated by robust growth brought about by supply-side tax cuts and deregulation. Economic freedom has much to recommend it, not least because it’s the best antidote to political extremism.

Πηγή: wsj.com