Portugal's center-right govt returns to power, despite risk

Passos Coelho expected to continue as prime minister

Portugal's president has invited the center-right coalition government of the past four years to return to power after it won a general election, even though it will be outnumbered in parliament by anti-austerity opponents who vow to force it out within days.

The coalition won the October 4 ballot with 38.4% of votes and will rule as a minority government. Pedro Passos Coelho, who has overseen deep cuts in pay, pensions and public services and steep tax hikes, is expected to continue as prime minister.

But an unprecedented alliance of left-of-center parties, led by the moderate Socialists and including the Communist Party and radical Left Bloc, has 122 seats in the 230-seat parliament and says it will use that majority to quickly bring down the government and take power itself, with a promise to ease austerity measures that have hurt Portuguese pockets in recent years.

The political environment in Portugal has introduced a note of uncertainty into the 19-country eurozone that could rattle investors only recently settled after Greece's radical Syriza rang alarm bells.

The issue is whether governments in the bloc are in a position to enact debt-reduction policies analysts say are needed to restore their financial health.

Debt-heavy Portugal needed a 78 billion-euro ($86.7 billion) bailout in 2011 amid the eurozone's financial crisis. Its economy is improving but remains fragile, and the center-right coalition says more austerity will be needed.

Portugal's budget deficit last year was the second-highest in the eurozone at 7.2%, and government debt remains high at almost 130% of gross domestic product the third-highest in the European Union. Portugal recorded average growth of less than 1% in the first decade of the century.

The head of state, who is usually a symbolic figure, faced two alternatives: bring back the government despite its disadvantage in parliament, or opt for an alliance of center- left parties which have yet to provide details of their commitments to each other.

President Anibal Cavaco Silva yesterday said in a televised address to the nation that he could not give power to a government that opposed Portugal's membership of international institutions such as the European Union and the 19-nation eurozone.