Portugal's opposition Socialists vow to wind back austerity

General secretary of Portuguese Socialist Party Antonio Costa (file pic) Image copyright Getty Images
Image caption Socialist leader Antonio Costa's rhetoric has stirred fears of adopting high spending, anti-austerity policies

Portugal's opposition leader Antonio Costa has ended months of near silence on his party's policies, with proposals that seek to present his Socialist party (PS) as an alternative to the austerity of the right-of-centre governing coalition, ahead of this autumn's general election.

Only two days beforehand, Mr Costa, who was elected last September in an unprecedented open primary, said the PS would ignore recommendations made by the International Monetary Fund in reviewing Portugal's post-bailout progress.

His comments prompted fears outside Portugal that the PS was edging towards the radicalism of Greece's ruling Syriza party - potentially endangering Portugal's eurozone status.

Image copyright Reuters
Image caption A woman walks past graffiti that says, "We demand our salaries"

The Portuguese have faced years of cuts in wages and pensions.

The impact of recession has been immense, and does not show in headline economic statistics.

In Portugal, the great majority of those registered as unemployed receive no jobless benefits at all, and hundreds of thousands - many of them young and well qualified - have gone abroad to seek work since the crisis broke.

Portugal's years of pain

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Image caption Portugal formally exited its bailout a year ago but painful austerity measures are still being felt
  • After Greece and Ireland, Portugal took an EU/IMF bailout of €78bn (£55bn; $86bn) in 2011
  • It exited the bailout in May 2014
  • Its debt has risen to 130% of GDP, up from 94% of GDP in 2010
  • Unemployment is at 13.7% but youth unemployment is above 33%

Big spending

The Socialists' programme was approved on Thursday after several hours of heated debate and key elements remain to be decided.

Mr Costa cited several pledges with major spending implications, including an increase in the school leaving age and 100 new health centres with GPs.

But he also said the party would respect Portugal's international obligations.

The draft manifesto made no mention of an earlier, controversial recommendation by a group of economists for a cut in social security contributions to encourage hiring.

Some fear it could sap the system's finances and Mr Costa has insisted it will be in the final manifesto, to be put to a national convention on 6 June.

Debate is also still raging on a uniform employment contract. Its aim is to stop short-term contracts gaining ground over permanent ones, but it could also end up eroding workers' rights.

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Image caption Prime Minister Pedro Passos Coelho says consensus on public finances with the opposition is unimaginable

Portugal's conservative President Anibal Cavaco Silva has tried to push the Socialists and the ruling coalition to agree to co-operate to ensure the sustainability of public finances.

But Prime Minister Pedro Passos Coelho said last week such a consensus was unimaginable.

The Socialists have led in the polls for most of the time since Mr Costa took on the leadership of the party, but the gap has now narrowed.

And there is a new party that has genuine links with Greece's Syriza party, as well as Spain's anti-austerity party Podemos, which is presenting a challenge to the mainstream parties.

Rui Tavares, the leader of Livre, is pushing for Portugal's debt to be restructured.

Livre is unlikely to win more than a seat or two, but with the election on a knife-edge, it could have some clout.

So far there is little sign of investors being spooked by the possibility of a Socialist government.

And while austerity continues to bite and unemployment is still rising, the finances are looking better. Portugal this week, for the first time in its history, sold debt at a negative yield - auctioning €300m euros (£210m) of six-month bills at minus 0.002%.

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