Portugal coalition partner head promoted to end rift

POWER PLAY::The leader of Lisbon’s junior coalition party is now the deputy prime minister, in a move the government hopes will quell tensions threatening its bailout

Reuters, LISBON

Mon, Jul 08, 2013 - Page 15

Portuguese Prime Minister Pedro Passos Coelho promoted the head of the government’s junior coalition party to be his deputy on Saturday, hoping to end a political rift that threatened to bring down Lisbon and endanger the country’s bailout.

The promotion of Democratic and Social Center People’s Party (CDS-PP) leader Paulo Portas, came after he resigned as minister of foreign affairs, raising fears his party would quit the coalition and rob it of its majority in parliament.

“We have reached a solid and far-reaching agreement,” Passos Coelho told a news conference after his center-right Social Democrats met with CDS-PP leaders. “This agreement will guarantee political stability until the end of our mandate.”

In another major concession, Passos Coelho gave Portas the role of co-ordinating negotiations with the “troika” of bailout lenders: the EU, the European Central Bank and the IMF.

His rightist CDS-PP party will also gain the economic ministerial portfolio, which will be held by Antonio Pires de Lima.

The agreement still has to be approved by Portuguese President Anibal Cavaco Silva, who will meet with all political parties to discuss the crisis today and tomorrow.

Opposition leftist parties have demanded early elections.

Portas has periodically been a strong critic of austerity policies imposed under the 78 billion euro (US$100 billion) bailout as Portugal bore three years of recession.

He resigned after Passos Coelho appointed a finance minister that Portas believed would continue on the austerity drive that critics say has exacerbated Portugal’s biggest economic slump since the 1970s.

The prime minister said the agreement with his coalition partner would mark the start of a new phase of the bailout, with a greater focus on economic growth and a push to reduce unemployment, which is at a record high of about 18 percent.

“We are looking ahead with determination to finish the [bailout] adjustment,” Passos Coelho said. “We want to end the adjustment within the scheduled time, without drama.”

Lisbon has sought to relax tough budget goals at least twice since it got the bailout in 2011 and Passos Coelho has said the government could request further easing of goals if the economy fails to grow.

Ratings agency Standard & Poor’s on Friday revised down Lisbon’s sovereign credit outlook to “negative” from “stable,” citing the impact of political uncertainty. Its “BB” rating for Portugal is in junk territory.