Sept. 27 (Bloomberg) -- Portugal holds local elections on Sunday, two weeks before the government hands in a budget proposal for 2014 that will include new spending cuts.
The municipal ballot will test public support for Prime Minister Pedro Passos Coelho as he seeks to trim spending by about 3.3 billion euros ($4.5 billion) in 2014 to meet targets set in Portugal’s 78-billion euro international bailout program. While the prospect of new measures is unpopular, the electoral fallout will probably be minimal, said Antonio Costa Pinto, president of the Portuguese Political Science Association.
“The punishment effect will be small because municipal elections are very local,” he said. “On the day after the elections, the government will announce what we already know: cuts in pensions and continued wage reduction in the public sector.”
Passos Coelho’s Social Democratic Party is vying for votes with the main opposition Socialists as Portugal tries to regain full access to debt markets. Voting in the municipal elections runs between 8 a.m. and 7 p.m. on Sept. 29, and results will start to be announced after polls close.
The Socialist lead over the ruling Social Democrats narrowed in a poll on parliamentary voting intentions published by weekly newspaper Expresso on Sept. 13. The survey showed 26.5 percent backing for the Social Democrats, up about 2 percentage points from August, and 38 percent support for the Socialists, an increase of 0.6 percentage point.
While the Socialists are probably set to win, “you won’t be able to draw big conclusions from that victory,” Costa Pinto said. Any “instability” in Portugal is related to the Constitutional Court, with the government’s main challenge being “to carry out spending cuts that are constitutional,” he said.
The Constitutional Court on Aug. 29 blocked a proposal to end labor contracts of some state workers that was part of a government plan to “requalify” public sector employees.
Government ministries will have to lower spending on purchases of goods and services by at least 10 percent next year, Coelho said on May 3. The prime minister is backed by his Social Democratic Party and the smaller conservative CDS party, which together have a majority of seats in parliament.
The government will hand in its 2014 budget proposal to parliament on Oct. 15. With the EU considering help next year to try to wean Portugal from the bailout, officials from the EU and IMF began a regular review of the aid program on Sept. 16.
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