While the government of Prime Minister Pedro Coelho was re-elected after recent elections, it is only with a minority. Coelho's government was known for its cooperation in passing austerity programs in return for a bailout four years ago.
Leftist parties including the Socialists and Communists finally managed to bridge their differences and agreed to a coalition government that would have a majority in parliament. Coelho has not been able to form a coalition that would have a majority in parliament. Nevertheless president, Anibal Silva, reappointed Coelho as prime minister:"I have designated Mr Passos Coelho as prime minister because he is the head of the coalition which won the October 4 parliamentary elections,"Silva refused to entertain the idea that he should appoint the left-wing coalition that would have a majority. The group has a mandate to undo the austerity regime Coelho created. Silva's move will appease the authorities in the EU and financial markets but will create a political storm in Portugal. Silva railed against the idea of a possible leftist bloc ruling:The core message of the Bloc is that there should be an end to wage cuts and Troika imposed austerity programs. While the Coelho coalition won 38.5 percent of the vote, they lost 28 seats. The new leftist coalition won 50.7 percent of the vote but did not exist as a coalition at the time of the election. Costa of the Socialists said the action of the president was a "grave mistake" that could engulf the country in a political firestorm. He said any new minority government would face a no confidence vote in parliament. Unlike Greece, Portugal is not now under a Troika guided regime so there will be no immediate funding crunch crisis. Nevertheless, Portugal is still in poor financial shape. Public debt is 127 percent of GDP and total debt 370 percent. Net external liabilities are 220 percent of GDP.Rui Tavares a radical green member of parliament said: “The president has created a constitutional crisis. He is saying that he will never allow the formation of a government containing Leftists and Communists. People are amazed by what has happened.” He pointed out that as part of the coalition deal the demands for a euro exit, and a withdrawal from NATO had been dropped. Silva was attacking the Left Bloc as a "straw man," Tavares claimed.
“In 40 years of democracy, no government in Portugal has ever depended on the support of anti-European forces, that is to say forces that campaigned to abrogate the Lisbon Treaty, the Fiscal Compact, the Growth and Stability Pact, as well as to dismantle monetary union and take Portugal out of the euro, in addition to wanting the dissolution of NATO. After we carried out an onerous programme of financial assistance, entailing heavy sacrifices, it is my duty, within my constitutional powers, to do everything possible to prevent false signals being sent to financial institutions, investors and markets,”Antonio Costa, leader of the Socialist Party, said he and his Left Bloc coalition "have clearly said that an exit from the euro and renegotiating debt are not on the negotiation table".