Portugal Can't Change Course on Budget Restraint, Guedes Says

Portugal must not change course on budget policy as the next government is due to take office following an election that left the ruling coalition without a majority in the country’s legislature, Parliamentary Affairs Minister Luis Marques Guedes said.

“Any scenario that adds uncertainty to what is the path of budget consolidation and stability necessarily puts in question confidence and investment,” Guedes told reporters after the weekly cabinet meeting. “The country is not in a condition to change paths or to create situations of prolonged uncertainty.”

Social Democrat Prime Minister Pedro Passos Coelho on Oct. 4 won the most seats in the country’s first general election since 2011, though his coalition fell short of the majority it had in the past four years. Socialist opposition leader Antonio Costa on Tuesday said he can form a stable government backed by a majority in parliament including the Left Bloc and the Communist Party that would be an alternative to a new term under Coelho.

Costa is meeting the Socialist Party’s parliamentary group from 5 p.m. on Thursday and its political commission at 9:30 p.m., a party spokesman said.

President Anibal Cavaco Silva completed his meetings with each of the parties represented in parliament on Wednesday and still hasn’t announced when he’ll formally appoint the next prime minister. On Oct. 6 he asked Coelho to try to form a new government, which he said must comply with European Union rules on budget discipline.

The European Commission forecasts Portugal’s ratio of debt-to-gross domestic product will start declining this year to 124 percent.

Socialist leader Costa, who has proposed narrowing the deficit slightly slower than Coelho, has said he would comply with Portugal’s European Union commitments. Costa has also said he won’t block a new Coelho government if his party can’t offer a stable alternative. Portugal is no stranger to forming minority governments, though they tend to be short-lived.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE