Socrates Says Political Crisis Would Harm Portugal

Portuguese Prime Minister Jose Socrates said a political crisis would harm the country after the Left Bloc political group said it will present a no- confidence motion in parliament next month.

“This motion is a colossal irresponsibility,” Socrates said in parliament today. “A political crisis at this moment only brings damage to our economy.”

Socrates became prime minister in 2005 and his Socialist Party won re-election in 2009 without a majority in parliament. The Social Democrats, the biggest opposition party, in October agreed to let the government’s 2011 budget proposal pass in parliament by abstaining.

The Social Democrats will analyze the situation and respond to the motion in due time, lawmaker Miguel Macedo said today.

Portugal is raising taxes and implementing the deepest spending cuts in more than three decades, aiming to convince investors it can narrow its budget gap further and avoid a bailout after the Greek debt crisis led to a surge in borrowing costs for high-deficit euro nations last year. Ireland in November became the second euro country, after Greece, to seek a bailout and the first to request aid from the European Financial Stability Facility.

‘Politics of the Right’

“This motion guarantees the fight against the politics of the right,” Francisco Louca, a leader of the Left Bloc said in comments broadcast by television station SIC Noticias. He said the no-confidence motion will be presented on March 10.

The government is trimming the wage bill by 5 percent for public-sector workers earning more than 1,500 euros ($2,045) a month, freezing hiring and raising value-added sales tax by 2 percentage points to 23 percent to help narrow a deficit that amounted to 9.3 percent of gross domestic product in 2009, the fourth-biggest in the euro region after Ireland, Greece and Spain.

Portugal will report a 2010 budget deficit equivalent to 7 percent of GDP or less than 7 percent, narrower than the 7.3 percent gap the government had forecast,Socrates said on Jan. 28.

The government has set a target for a budget deficit of 4.6 percent of GDP in 2011, and aims to reach the European Union limit of 3 percent in 2012.

The Bank of Portugal on Jan. 11 said GDP will shrink 1.3 percent in 2011 as consumer demand drops and the government cuts spending. Portugal’s economic growth has averaged less than 1 percent a year in the past decade, one of Europe’s weakest growth rates.

The Social Democrats led the ruling Socialist Party by a wider margin in a survey of voters’ intentions for parliamentary elections published on Jan. 24 by newspaper Diario Economico. The survey indicated 46.1 percent backing from voters for the Social Democratic Party led by Pedro Passos Coelho, 1.8 percentage points higher than in a November poll, and 26.3 percent support for the Socialists, 0.6 percentage point less than in the previous poll, Diario said.

To contact the reporter on this story: Joao Lima in Lisbon at jlima1@bloomberg.net.

To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net.

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