Portugal’s government ousted amid austerity backlash

Portuguese Prime Minister Pedro Passos Coelho was removed from power on Tuesday less than six weeks after wining the country’s general election when an opposition coalition voted down his governing program. The move saw traditionally opposing groups come together to reject Prime Minister Pedro Passos Coelho’s proposals, making his government the shortest-lived since the revolution of 1974.

Portugal had been implementing harsh austerity in the past few years after it signed a 78-billion-euro bailout program with global lenders in May 2011.

Portugal’s government has been forced to resign after its austerity policies were voted down by a leftist alliance, prompting fresh concerns over the Eurozone.

The leftist alliance intends to reverse cuts in pay, pensions and public services, as well as tax increases that have brought widespread hardship, street protests and strikes in recent years.

They formalised their agreement to provide majority backing for a Socialist-led government on Tuesday just before the vote.

“The Socialist Party has made a radical choice, preferring to team up with minorities which they have always fought”, he added after the vote.

The centre-right government introduced debt-reducing austerity measures demanded by creditors. If Costa leads a government with the Communists and Left Bloc, it will be Portugal’s first to include far left parties since Portugal returned to democracy in 1974 after decades of right-wing dictatorship, Barroso said.

– “Balancing act” – =================== “A PS government will not seek confrontation with the European Union”.

But Mr. Costa has often said any government he leads will respect the compact and keep Portugal within the single-currency.

Yields on the country’s benchmark 10-year bond rose 15 basis points to 2.84%, compared to 2.29% before the elections.

Despite the ambitious plans, Mario Centeno, a Harvard-educated economist who is a special adviser to Portugal’s national bank, has vowed the new Government will “abide by its European responsibilities and honour all its commitments”.

But now that this short-lived experiment in minority government is crumbling, what’s next?

Experts fear a leftwing alliance could prove unstable, with Commerzbank analyst David Schnautz warning of the possibility of early elections next year and fatigue with years of austerity meaning much-needed reforms could be put on the back-burner.

Portugal’s new government faced what were likely to be its final hours in power Tuesday as anti-austerity forces in Parliament prepared to force its resignation.