PORTUGUESE ELECTION RESULTS PORTEND UNCERTAINTY

C O N F I D E N T I A L SECTION 01 OF 03 LISBON 000532

SIPDIS

E.O. 12958: DECL: 10/07/2019
TAGS: PGOV PREL SCUL SOCI PO
SUBJECT: PORTUGUESE ELECTION RESULTS PORTEND UNCERTAINTY

REF: A. LISBON 516

B. LISBON 529

C. LISBON 88

Classified By: PolEconOff Lucy Chang for reasons 1.4(b,d)


1. (C) Summary: The Socialists resumed power in the
September 27 Portuguese elections but lost their absolute
majority in Parliament, losing 24 seats to the far-left Left
Bloc and the conservative Popular Party (CDS/PP). With the
loss of their majority, the Socialists must now either form a
coalition government, which is unlikely given ideological
differences with potential coalition partners and Prime
Minister Socrates' distaste for sharing power, or negotiate
with the left and the right to pass legislation on a
case-by-case basis. A cabinet reshuffle is anticipated, with
controversial and/or ineffective ministers likely to be
replaced. The 2010 budget is likely to pass, with the
abstention of opposition parties, but the long-term stability
of a Socialist minority government is uncertain. End
Summary.

VICTORY WITHOUT A MANDATE
--------------

2. (C) Portuguese voters returned the Socialist Party to
power in the September 27 election without much enthusiasm
(ref A). Although the Socialists were re-elected with 37
percent of the vote, they lost their previous absolute
majority in Parliament by losing 24 seats, dropping to 97 in
the 230-seat assembly. They now must rely on adroit
parliamentary maneuvering to govern. This "victory" marked
the first time in Portuguese constitutional history that a
second-term government won with less support than during its
first term. This loss of support has been largely attributed
to voters' disillusionment over Socrates' unfulfilled
campaign promises and controversial reforms, Portugal's high
unemployment, and Socrates' alleged involvement in a kickback
scandal (ref C) that tarnished his image. Many voters
appeared to be simply weary of what they perceived to be
Socrates' aggressive, authoritarian, and arrogant approach to
governing.


3. (U) During his first term as prime minister, Socrates
pursued aggressive reforms in various sectors under a
progressive platform. Among the most controversial was his
education sector reform, which introduced a meritocracy-based
peer review system for promotion of public school teachers
(ref B). This initiative prompted angry protests from
teachers and calls for the removal of Education Minister
Maria de Lurdes Rodrigues. Teachers' unions demanded a
return to a seniority-based promotion system and job
protection.


4. (U) Among other promises in the 2005 campaign, Socrates
had pledged to create 200,000 new jobs, but fell short of his
promise. Currently, with more than 500,000 unemployed,
Portugal has the second highest unemployment rate in Europe,
after Spain. While the official figure is 9.1 percent, the
real unemployment rate could be as high as 13 or 14 percent
due to "hidden unemployment," including seasonal laborers,
part-time employees, and workers who have recently been laid
off but continue to be counted as employed. Although the
weakness in the economy reflects the worldwide recession, the
Socialists inevitably were blamed by voters.

SOCIAL DEMOCRATS RUN A WEAK CAMPAIGN
--------------

5. (C) Key to the Socialist victory was the failure by the
main opposition Social Democratic Party (PSD) to mount an
effective campaign of its own. The right-of-center Social
Democrats promised "politica de verdade" (politics of truth),
but did not provide voters with a clear vision of the future.
PSD leader Manuela Ferreira Leite ran a negative campaign,
focusing attacks on Socrates rather than proposing new ideas,
and criticizing the Socialists for "democratic asphyxia,"
claiming that the Socialists were controlling the press and
suppressing freedom of expression. Her attacks and
criticisms did not resonate with voters.


6. (C) Ferreira Leite was especially criticized for political
ineptitude in citing the autonomous region of Madeira,
governed by the same authoritarian president since 1974, as a
model of democracy. She was also dinged for hypocrisy in
characterizing Socrates as dishonest while including Antonio
Preto, who had been accused of corruption, on the PSD slate.
Her lackluster performance in the debates, her austere image
and lack of charisma, and the PSD's unpopular conservative
moral discourse against same-sex marriage and abortion have
also been cited for the PSD's weak performance.


7. (C) Another, though less significant, factor in the PSD's

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poor performance may have been the refusal by Portuguese
President Cavaco Silva (who led the PSD government from 1985
to 1995) to clarify statements made to the press by his press
advisor alleging wiretapping of the offices of the presidency
by the Socialists. While the details of this episode remain
unclear, it cast the president in a negative light and
undermined the PSD campaign.

FUTURE OF SOCIALIST GOVERNMENT UNCERTAIN
--------------

8. (C) While some have a pessimistic view of the future of
the Socialists' second-term government, predicting its
dissolution as early as 2011, others have more confidence
that the minority government will persevere by cooperating on
legislation with smaller parties. The ability of the
Socialists to govern with a minority could be hindered,
however, by Socrates' preference to exercise tight control
and his disinclination to share power.


9. (C) The Socialists could form a quiet pact with the
conservative CDS/PP in which the CDS/PP would agree to vote
for the budget, abstain from the vote on the Socialist
government program, and vote in favor of one or two priority
reforms. Alternatively, Manuela Ferreira Leite could
relinquish the PSD leadership in favor of someone who could
reach a pact with the Socialists under which the PSD would
abstain from the budget vote in exchange for PSD influence in
cabinet selections. A more far-fetched possibility is one in
which Ferreira Leite would stay and vote against the budget
and the Socialist program, forcing the government to fall and
the president to call parliamentary elections in spring 2010,
in the hope that the PSD would win. In the event of new
elections that soon, however, the Socialists would likely win
a plurality again.


10. (C) A Socialist minority government could fail under any
of three circumstances: if an absolute majority rejects the
government; if a vote of confidence is not approved; or if
the opposition presents a censure motion (a motion that can
be presented only one time per party during the four-year
legislative mandate). It appears that the Socialist program
will be approved if President Cavaco Silva is assured that
Socrates has the necessary floor support. If the four
opposition parties were to reject the Socialist program, they
would run the risk of being blamed by the voters during a
time of economic crisis.

The Way Forward
--------------

11. (C) Many predict that the friction lingering from the
election campaign will dissipate and that opposition parties
will compromise with the government on essential legislation.
It is likely that Socrates will talk with opposition parties
on cabinet choices and will incorporate in his program some
of their proposals, while abandoning for now his
controversial education reform. Socrates will probably seek
the support of the CDS/PP on the budget in exchange for
naming independent or moderate ministers acceptable to the
CDS/PP. Influential in the Portuguese Agricultural
Confederation, the CDS/PP will likely want a voice in naming
the new minister of agriculture or minister of economy.

Cabinet Reshuffle Anticipated - Speculation Begins
-------------- --------------

12. (C) Socrates promised during the campaign that there
would be a "new government with new ministers." He did not
specify how many would be replaced, but political analysts
estimate that just 40 percent will remain. Currently, about
40 percent of his ministers are technocrats and 60 percent
are career politicians. Among those likely to retain their
portfolios is Foreign Minister Luis Amado, who is widely
regarded as a competent, non-controversial, solid figure
within the GOP and a good friend of the U.S. He was lauded
for the success of the EU-Africa Summit in Lisbon in 2007
during Portugal's EU presidency. If Amado decides to leave
the cabinet (as has been rumored),Manuel Lobo Antunes,
former MFA Secretary of State for European Affairs who
negotiated the EU Lisbon Treaty, could be named new Foreign
Minister. Other names are also rumored.


13. (C) Among those likely to be replaced are Education
Minister Maria de Lurdes Rodrigues, widely viewed as the
inflexible, strong-willed architect of Socrates'
controversial education sector reform, and Minister of
Agriculture Jaime Silva, who has been criticized for failing
to disburse EU agricultural funds to farmers and for
suggesting that fishermen should leave the fishing industry
and open up sandwich shops. (Silva is a strong supporter of
GMOs domestically and in the EU.) At one point, he publicly
acknowledged that 40 percent of his staff was redundant.
Also likely to be replaced is Defense Minister Nuno Severiano

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Teixeira, who has announced he wants to return to academia.
While in office, he was plagued by problems with military
unions over pension benefits and the reform of the military
health system. He could be replaced by Julio Miranda Calha,
current chairman of the Defense Committee in Parliament and a
close friend of the Parliament president.


14. (C) The Minister of Finance could be replaced by current
Minister of Labor and Social Security Jose Vieira da Silva,
who was responsible for the Socialists' rural electoral
campaign. Regarded as intelligent and leftist, he would be
the second most important person in the government if named
Finance Minister. The new Minister of Economy could be
Basilio Horta, current president of the Portuguese Agency for
Investment and Foreign Trade (AICEP) and former CDS/PP
presidential candidate. To be appointed, he would have to
suspend his CDS/PP party membership and be named as an
independent.

COMMENT
--------------

15. (C) The Socialists are hanging on to power, but the new
government will lack the sweeping mandate given the previous
government, and Socrates could be hamstrung by the need to
muster support from parties both to the left and right to
enact his program. While his personal style may not lend
itself to crafting the temporary alliances required to govern
and demands for concessions by his partners could stifle new
reforms, Socrates' political instincts should lead him to
compromise with other parties to ensure the stability of his
government. Governing as a minority will require a careful
middle course to satisfy all partners, which could breed
dissatisfaction among the more activist elements of the
party, and further bleed support. In our view, it is not
likely that the opposition parties will reject the
government's program and 2010 budget and bring down the
government, at least not in 2010. The opposition recognizes
the need for stability given the current economic crisis, and
will likely give the Socialist government some breathing
space, provided Socrates, likewise, is willing to make
accommodations.









For more reporting from Embassy Lisbon and information about Portugal,
please see our Intelink site:

http://www.intelink.sgov.gov/wiki/portal:port ugal
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