July 7 (Bloomberg) -- Portuguese Prime Minister Pedro Passos Coelho said Paulo Portas, leader of the conservative CDS party, will become vice premier as part of an agreement to hold the coalition government together and avoid early elections.
Portas will be responsible for coordinating economic policy and the relationship with the so-called troika of officials from the European Commission, European Central Bank and International Monetary Fund that oversee the country’s aid plan, Coelho said in Lisbon late yesterday. Coelho, who leads the Social Democrats, needs the smaller CDS party for a majority in parliament to pass measures and meet terms of the bailout from the EU and IMF that ends in June 2014.
“Portugal will continue to have a stable and determined government to solve the country’s serious problems,” Coelho said. “We want to complete the aid program by the dates that have been set. We want to create the conditions for a new economic cycle.”
Portas said on July 2 he was quitting as foreign affairs minister in a dispute over budget policy with the prime minister. Coelho, who lost Finance Minister Vitor Gaspar the day before, refused to accept the resignation, citing Portas’s role as leader of a coalition party. Portas never left the Cabinet because Coelho didn’t submit his resignation to the president.
Coelho on July 5 presented the agreement between the two coalition parties to President Anibal Cavaco Silva, who still has to assess the plan. Cavaco Silva, who as president has the power to dissolve parliament and call early elections, is set to start meeting with Portugal’s political parties tomorrow.
The agreement has other consequences on the composition of the government, and the proposed Cabinet changes are to be announced by the president, the prime minister said yesterday. Antonio Pires de Lima, chief executive officer of brewer Unicer SA and a CDS party official, may be named economy minister, newspaper Jornal de Negocios reported on July 5.
Besides Portas, Agriculture Minister Assuncao Cristas and Social Security Minister Pedro Mota Soares are the other representatives of the CDS party in the Cabinet. Portas, a minister of state, already had more senior status than most other ministers.
Portas on July 2 said he was resigning after opposing the prime minister’s decision to name Secretary of State for the Treasury Maria Luis Albuquerque as finance minister to replace Gaspar. Prime Minister Coelho yesterday confirmed Albuquerque will remain finance minister.
The eighth review of Portugal’s progress on meeting terms of the 78 billion-euro ($100 billion) aid program is due to start July 15, the Finance Ministry said last month. The government has started raising cash to finance its 2014 deficit after covering its needs for this year, then-Finance Minister Gaspar said in May.
Coelho is battling rising joblessness and a deepening recession as he cuts spending and raises taxes to meet the terms of the bailout. He announced measures on May 3 intended to generate savings of about 4.8 billion euros through 2015 that include reducing the number of state workers.
On March 15, the government announced less-ambitious targets for narrowing its budget deficit as it forecast the economy will shrink twice as much as previously estimated this year. It targets a deficit of 5.5 percent of gross domestic product in 2013, 4 percent in 2014 and below the EU’s 3 percent limit in 2015, when it aims for a 2.5 percent gap. Portugal forecasts debt will peak at 123.7 percent of GDP in 2014.
The Portuguese government sought a “more realistic” budget deficit target for 2014 than the 4 percent goal set by the troika of EU and IMF officials, Portas said on May 5.
Economic growth has averaged less than 1 percent a year in the past decade, placing Portugal among Europe’s weakest performers. The government projects GDP will contract 2.3 percent this year before expanding 0.6 percent next year. The jobless rate will climb to 18.2 percent in 2013 and 18.5 percent in 2014.
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