PORTUGAL: GROWING TENSION IN PARLIAMENT TESTS

C O N F I D E N T I A L SECTION 01 OF 02 LISBON 000621 SIPDIS E.O. 12958: DECL: 12/14/2019 TAGS: PGOV ECON EFIN SOCI PO SUBJECT: PORTUGAL: GROWING TENSION IN PARLIAMENT TESTS GOVERNABILITY REF: LISBON 516 Classified By: Poleconoff Lucy Chang for reasons 1.4(b,d) SUMMARY -------------- ¶1. (SBU) In September elections, Socialist PM Socrates lost the absolute majority in Parliament he had enjoyed for four years. The Socialists now have 97 seats in the 230-seat Parliament, but have chosen to govern as a minority rather than enter into a coalition with the opposition. Two months into their four-year term, they are finding it tougher than expected to pass legislation, as opposition parties on the left and right are newly emboldened. In recent weeks of heated debate, opposition parties have challenged the parliamentary leadership of the Socialist Party (PS) by passing a series of resolutions opposed by the Socialists. ¶2. (SBU) Following their November 27 passage of a resolution to delay a key piece of legislation that would have increased tax revenue, Prime Minister Socrates, who was counting on the revenue to help close the budget deficit, accused the opposition of "irresponsibility." The leadership of the main opposition Social Democratic Party (PSD),in turn, blamed Socrates for the fractious political climate and the economic situation. The growing tension in Parliament portends serious challenges for Socrates in the January debate on the 2010 budget and a potential political crisis that could, in a worst-case scenario, lead to dissolution of Parliament. End Summary. OPPOSITION BLOC CHALLENGES RULING PARTY -------------- ¶3. (U) On November 27, for the first time in the newly elected Parliament, opposition parties formed a bloc to defeat the Socialists. Five opposition parties collaborated against the ruling party to approve a proposal by the right-wing Popular Party (CDS/PP) to delay for one year (until 2011) the implementation of a new tax code that was introduced by the Socialists earlier this year. The vote constituted the first of several legislative upsets for Socrates and his minority government. In the span of single day, the Socialists were defeated on a total of 11 of 13 "anti-crisis" resolutions proposed by the opposition. Prime Minister Socrates estimated that if all these measures were implemented they would increase public spending by more than 2 billion euros in 2010. ¶4. (U) The tax bill, passed in July 2009 by the previous Socialist-controlled Parliament, was to have gone into effect on January 1, 2010. It would expand the social security tax base; increase the social security tax paid by employers; and impose a greater tax burden on self-employed workers. According to the independent, non-partisan parliamentary Budget Support Technical Unit, implementation of the legislation would have increased government revenue by 80 million euros in 2010 and 170 million euros in 2015. ¶5. (U) On December 10, the opposition succeeded in passing additional bills. Three of four PSD-sponsored anti-corruption bills were approved, as all five opposition parties joined forces to criminalize "illicit enrichment" in the exercise of public functions. The CDS/PP agreed to abstain on the vote, while the Social Democratic Party, Communist Party (PCP),Left Bloc (BE),and Green Party (PEV) supported the PSD resolution. The Socialists alone voted against the bill on constitutional grounds, arguing that the definition of "illicit enrichment" was unconstitutionally vague and that, in any event, adequate laws were already on the books to combat corruption. SOCIALISTS REACT WITH CRITICISM OF OPPOSITION -------------- ¶6. (U) The Socialists reacted to the opposition revolt with harsh criticism. Minister for Parliamentary Affairs Jorge Lacao pointed to the lack of "conditions of governability" and stressed that governability is a shared responsibility among all parties, while Finance Minister Teixeira dos Santos warned of the harmful consequences of approving such measures. He cautioned that they would render it difficult to reduce the budget deficit. ¶7. (U) Prime Minister Socrates accused the opposition of "irresponsibility" and of "provoking ingovernability," and underscored that it is the Government that takes the lead on budget policy. PSD leader Manuela Ferreira Leite countered by blaming Socrates for the political situation and accusing him of "not wanting to negotiate." PSD Parliamentary Group leader Jose Pedro Aguiar-Branco criticized the Socialist parliamentary leadership for its failure to accept that it no LISBON 00000621 002 OF 002 longer has an absolute majority. COMMENT -------------- ¶8. (C) While these bills still must be reviewed in committee and returned to the floor for final plenary vote, they underscore the weakened position of the ruling party, which now holds only 42 percent of the seats in Parliament. (The main opposition party, PSD, holds 35 percent.) When the Socialist Party lost its absolute majority in September elections, it lost its ability to advance its agenda without the support of other parties. The opposition appears to be gaining ground, severely testing Socrates' governability less than three months after he assumed office with a minority government and swaggering confidence. It is likely that the opposition mounted this assault on the Socrates government not so much to control public spending and fight corruption but because they sensed Socrates' vulnerability and seized the opportunity to weaken him politically. ¶9. (C) The growing tension in Parliament portends serious challenges for the Socialist Party in the January debate on the 2010 budget (with the PSD leadership warning that it may vote against it),and puts increasing pressure on Socrates to compromise on core PS priorities. The Government and the Socialist Party have been accused of dramatizing the situation and playing victim, but ultimately it is the Government's job to govern -- and this is a test of its ability to do so. At stake is the viability of the Socialist minority government. While the opposition-dominated Parliament approved the Socialist government's 2009 budget amendment last week (with the abstention of the center-right PSD and the right-wing CDS/PP),the critical test of governability will be the debate over the 2010 budget next month. The opposition is emboldened, and surprisingly well-coordinated considering their ideological differences. In a worst-case scenario, continued opposition to Socialist measures or a prolonged legislative stalemate could conceivably weaken the Government enough to trigger new elections. Under the constitution, however, the earliest the president can dissolve Parliament and call for new elections is April 2010. This gives Socrates four months to get his legislative house in order. For more reporting from Embassy Lisbon and information about Portugal, please see our Intelink site: http://www.intelink.sgov.gov/wiki/portal:port ugal BALLARD