Charlemagne: the perky Portuguese

Social democracy is floundering everywhere in

Europe, except Portugal
A small miracle on the Atlantic

Print edition | Europe Apr 14th 2018

ANTONIO COSTA, Portugal’s affable prime minister, greets your columnist with a
broad grin as he settles his hefty frame into a sofa in his official residence. He has a
lot to smile about. Lisbon, among Europe’s hottest tourist destinations, is enjoying
a mini startup boom. Portugal’s footballers are the European champions, and its
politicians have nabbed a clutch of senior international jobs. And above all, he is
the winner of a high-stakes political gamble.

When Mr Costa’s Socialist Party lost an election in 2015 to the centre-right (and
confusingly named) Social Democrats, who had overseen a harsh EU-imposed
austerity programme during a three-year €78bn ($107bn) bail-out, most observers
expected the Socialists to prop them up in a left-right “grand coalition” of the sort
now common across Europe. Instead Mr Costa, the son of a communist intellectual
from Goa, Portugal’s old colony in India, convinced two hard-left parties—the old-
school Communists and the modish Left Bloc—to support a minority Socialist
government in exchange for modest policy concessions.

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Nothing like this had been tried before in

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Mr Costa’s experiment the geringonça
(“contraption”), and gave it six months at
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most. Portugal’s president threatened to
reject the proposed government outright. Creditors feared a free-spending leftist
government would send investors packing.

Yet over two years later the contraption is grinding along and the sky has failed to
fall in. Some wage and pension cuts have been reversed, firms are creating jobs at a
neat clip, foreign investors are eagerly sniffing around and the public finances are
in rude health; the government hopes to balance the books next year. Portugal has
become a bond-market darling while claiming to stand in the vanguard of the battle
against austerity. “We showed that there is an alternative to ‘There is no
alternative,’” says Mr Costa. He enjoys approval ratings most leaders would kill for.
Little wonder Europe’s beleaguered social democrats are beating down his door.

Does Portugal have anything to teach them? Mr Costa notes modestly that “every
country is specific.” Still, he has one or two ideas. Grand coalitions play into the
hands of populists, he suggests, because they signal to voters that political contests
are redundant. He cites Germany, the Netherlands and Austria as cautionary tales;
social democratic parties in all three are floundering after governing with the right.
An aide says that “civilised conflict” helps keep politics, and parties, alive. That is a
bracing message in an era of cosy political pacts.

Pedro Magalhães, a political scientist at the University of Lisbon, points out that
Portugal’s Socialists differ from many of their counterparts in Europe. The party
sprang not from trade unions but from elites desperate to establish a bulwark
against communism after the end of military rule in the mid-1970s. The party thus
seeks power, not purity, and the election result gave a united left the chance to
block a right-wing minority government. No one likes grand coalitions, but in
many countries parliamentary arithmetic leaves centrist parties no choice but to
team up against the extremes. Mr Costa’s gambit was bold, but also opportune.

The Left Bloc and the Communists hammer the Socialists on matters like foreign
policy but hold fire when it matters, notably on the budget. Neither is fully
comfortable with the deal, but both know they would find the centre-right
alternative less palatable, and they can take credit for policies like raising the
minimum wage or halting transport privatisations. Helpfully, the growth in
Socialist support since 2015 has come largely at the expense of the right, soothing
the leftists’ fear that the contraption would turn out to be their death warrant. Mr
Costa says the arrangement will survive until next year’s election. And beyond?
“Why not?”

Not a panacea
Even Mr Costa’s opponents concede that he is a canny operator. But his success has
been oiled by a healthy squirt of good luck. The Socialists assumed office as
Portugal’s recovery took off, aided by growth in the European markets that take 70%
of its exports, and built on the measures taken by the previous government. The
European Central Bank’s bond-buying had calmed markets. Tourism has boomed,
thanks to instability in other warm countries. Perhaps most importantly
immigration, the issue tearing apart so many European parties of the left, does not
animate Portuguese voters. It is the departure of people that causes a bigger
headache: during the crisis 250,000 Portuguese, disproportionately of working age,
upped sticks in four years.
Portugal’s squeeze on spending had to be financed from somewhere. The axe has
fallen on public investment, which was slashed in 2016 to the lowest level in the
EU. Mario Centeno, the finance minister, says this was largely the result of a
temporary drop in EU subsidies, and chuckles at the sight of “so-called neoliberals”
who now consider Keynes their “god”. He prefers to draw attention to Portugal’s
healthier banks and buzzing universities, though he adds that investment is
climbing again. Another fear surrounds Portugal’s huge debt, which explains Mr
Centeno’s relentless focus on the deficit.

As this suggests, Portugal’s left-wing government is thriving partly because it is not

especially left-wing. For now it is fixated on deficits and debt rather than
investment and public services. A centre-right government would be doing much
the same. And so, despite Mr Costa’s warm words, the contraption will surely prove
to be a temporary marriage of convenience; his party is already said quietly to be
putting out feelers to the Social Democrats. European leftists may find inspiration
in Portugal. But they will have to seek ideas elsewhere.

This article appeared in the Europe section of the print edition under the headline "The perky Portuguese"

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