Black Swan Lands In Portugal As Socialists Move To Overthrow Government

Tyler Durden's picture

Late last month we highlighted to reappointment of Portuguese PM Pedro Passos Coelho, noting that, in the words of Communist leader Jerónimo de Sousa, the President’s move to ignore the left’s attempt to form a government in the wake of largely inconclusive elections may be a “manifest waste of time.”

As FT put it a few weeks back, “no government on the left or right [can] hope to survive without support from the PS, which won 32.3 per cent [in October]” which means President Anibal Cavaco Silva might have made a mistake in propping up Coelho as the PM’s restoration will only serve to embolden an already angry left coalition. 

Well sure enough, socialist leader Antonio Costa has now “formalized” plans to unite with the Left Bloc and Communists in order to reject the Coelho government. Here’s Bloomberg

Portugal’s Socialists approved a plan to join forces with three other parties and oust Prime Minister Pedro Passos Coelho’s administration, raising the prospect of a new government committed to speeding the reversal of spending cuts tied to the country’s international bailout.


The Socialist-led program “is clearly less market-friendly than the one of the incumbent government,” analysts at the Royal Bank of Scotland Group Plc in London, including Clement Mary-Dauphin, said.


The Coelho government will fall if the Socialists and their allies close ranks and guarantee a majority in parliament to reject the program in a vote scheduled for Tuesday. President Anibal Cavaco Silva, who has the power to name prime ministers, would then decide if he’ll ask Costa to form a coalition. Parliament can’t be dissolved less than six months after it’s elected, meaning Cavaco Silva doesn’t have the option of calling fresh elections.


“The conditions are in place to form a Socialist Party government supported by a majority in parliament,” the party said in a statement e-mailed early on Monday. The Socialist government can be “stable” and last for a full term, it said.

Well, it can probably be "stable" domestically, but don't think for a second that Brussels and Berlin are going to put up with this.

After all, the whole point of putting Alexis Tsipras through round after round of "mental waterboarding" over the summer was to discourage any Syriza sympathizers from attempting to use a euro exit (i.e. proving that the EMU is in fact "dissoluble" despite the protestations of many a eurocrat) as a bargaining chip on the way to negotiating for debt relief. As we put it, "the real question is whether or not the ATM lines, empty shelves, and gas station queues in Greece have had their intended psychological effect on Spanish (and Portuguese) voters. In other words, the question is whether the troika has succeeded in undercutting the democratic process outside of Greece by indirectly strong-arming the electorate."

The answer, apparently, is "no" because as Bloomberg goes on to point out, the new coalition in Portugal will likely push to roll back the programs that have made the country a bailout "success" story:

Yields [on Portuguese bonds] rose 6 basis points to 2.74 percent as of 8:53 a.m. London time, after reaching 2.78 percent, the highest since July. While the security traded as high as 18 percent three years ago at the height of Europe’s debt crisis, it was as low as 1.5 percent in March and 2.3 percent just before the elections.


The Left Bloc has said in the past that it wants to restructure the country’s debt, and the Communists have said Portugal should prepare to exit the euro. The Socialist, who requested the bailout and then lost the 2011 election, have been less radical, voting alongside Coelho’s coalition on policies including the treaty establishing the European Stability Mechanism rescue fund.

So while Costa will probably take a more moderate approach than his new coalition partners, the socialists are aligning with anti-euro parties which means that in failry short order, you'll likely see friction develop between Lisbon and Brussels and critically, between Lisbon and Berlin. Here's AFP:

The prospect of a new government backed by the Left Bloc -- which is close to Greece's anti-austerity Syriza -- and the radical Communists raised concern in Europe, even though the Socialist Party (PS) has insisted that "Portugal will respect its international commitments" whoever takes the reins.

Note that this is the worst nightmare for Jean Claude-Juncker, Angela Merkel, and Christine Lagarde. Just about the last thing the EMU needs is to face a Greek rerun with a country that actually "matters" just as the bloc is desperately attempting to cope with the worsening refugee crisis. But then again, you shouldn't worry because just like Bear Stearns wasn't going under, Portugal will never ask for debt relief...

...and it's a good thing, because all-in, Portugal has one of the highest debt burdens around...

*  *  *

Bonus color from Citi:

Jose Mourinho may share more than just a common nationality with Portuguese Prime Minister Passos Coelho; both appear to be on the brink of losing their jobs. Portugal may be about to see the first power-grab of its kind in Europe since Turkey’s ‘real postmodern’ coup of 1997 (link here, for those interested).

UKIP MEP Nigel Farage has compared the situation in Portugal to a “modern day implementation of the Brezhnev Doctrine”. Whilst that latest comparison may be a little dramatic, the ramifications and wider consequences of the situation unravelling in Portugal could be huge. We highlighted back at the start of the summer that Portugal could well be Europe’s ‘next Greece’ and fears are perhaps about to be realised…


Portuguese elections were held on October 4, delivering a centre-right government under PM Coelho – the Forward Portugal Alliance (PAF). This group has already been in power for four years, and had imposed a tough regime of austerity including cuts to pay, pensions and public spending, with tax hikes – all as part of a EUR78bn bailout agreement with the Troika. The country only just emerged from recession in 2014.

Coelho’s group won the most votes and has the largest bloc of seats in parliament; however, it lost its overall majority.

Now the Socialist Party and a number of allies (Communists, Green Party and Left Bloc) control 122 seats in the 230 seats parliament. Their leader, Antonio Costa, has pointed out that 62% of the population, in his eyes, ‘voted against’ the austerity politics of the incumbent government. This new leftist alliance is anti-austerity and fiercely Eurosceptic – several of the parties campaigned directly to withdraw from the EUR.

Despite their apparent majority, the President spurned the anti-European leftists and named the centre-right group under PM Coelho as a minority government. He was supposedly under pressure to do so from Germany’s Chancellor Merkel who described the prospect of a radical anti-austerity coalition in Portugal as “very negative”. The left-wing alliance has now vowed to oust the government and put an end to austerity.

Potential ramifications:

As you would expect, the first consequence for these alarming developments was for Portugal’s bond yields to surge this morning. It can do a weak EUR no favours either in the long run.

European totalitarianism? More poignantly though, this is being touted by Eurosceptics as a prime example of what is often referred to as ‘Brussel’s totalitarianism’. In their eyes, what would be a democratically elected majority (the left coalition) with a clear mandate to challenge the Troika’s austerity programme and perhaps even leave the single currency, has been quashed. They argue that Portugal’s sovereignty has been trampled upon in the name of the greater good of the union – if democratic elections are only legitimate if the result pleases Brussels, is there real democracy in Europe?

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Coming soon to Lisbon:

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_ConanTheLibertarian_'s picture

If this helps to trigger the EU collapse then bring it on!

y3maxx's picture

No middle ground anymore....either corrupt Fasvism or....corrupt Socialism.

Haus-Targaryen's picture

Calm down everyone -- as Ghordo pointed out last time -- this is totally within Portugal's constitution.  The PoP can do this, as he too is elected like in the United States.  Thus his decisions re; government are completely political, and not a-political like many other heads of state in Europe.  

Best case for us/worst case for bankers -- Portgual runs without a government until the next elections in 18 months or so.  There will be no Greece in portugal until at least 2017.  

Bummer.  But absent a revolution there -- it is the way it is.  

Stainless Steel Rat's picture
Stainless Steel Rat (not verified) Haus-Targaryen Nov 9, 2015 7:54 AM

C'mon Portugal!  What the heck is wrong with a PR guy from a brokerage firm who heads the center-right party that was born trying to pass itself off as Socialist.  Don't they have a right-wing press there to reinforce their lie by calling him left of Mao?  "Social Democrats" indeed.

NoDebt's picture

We should just go back to having kings and emperors so we can dispense with this ridiculous and obvious fiction of representative democracy.  

Reichstag Fire Dept.'s picture

*re brands self as Anarcho Monarchist*

Devotional's picture

Incorrect, constitutionally the President will have to accept the new government shaped by socialists/communists.

portuguese man-of-war's picture

Constitutionally the President does not have to accept the new government. The question is political, not constitutional.

Ghordius's picture

the president of Portugal is not elected by the people (or by electors) as in the US. he is, as in something like 20 other european constitutional republics, selected by super-majority by Parliament

yes, he still has the power of making several proposals of government to Parliament. like the exiting gov (Coehlo) or the technical gov he selected for the period between Parliament dissolving and the new Parliament being elected and starting business (in this case... Coehlo, again) and he made a proposal involving... Coehlo

the european Left has spent a lot of ink writing that selecting Coehlo is a slap in the face to the "obvious" results of social democrats, socialist and communists having won a majority of the seats

nevertheless, it's exactly how the President has to behave if he follows the constitution and the historical precedent

now those unlikely political bedfellows have their chance of setting up a majority and form their government... IF they can

if they cannot find the numbers... it's either a minority government headed by Coehlo, or a coalition between the conservatives and the socialists (hear the communists shriek) or the President follows the constitution, disbands this Parliament and calls again for elections

Portugal had a revolution, not that long ago. Portugal has a quite serious, modern and sensible constitution. It's there to read, in several languages

portuguese man-of-war's picture


(I always appreciate your comments but,) the President of Portugal is elected by the people in universal elections, and he has the power to dissolve the parliament (except on the 6 months starting the term and 6 months before he finishes the term - which is this case).

The name of the current PM is Coelho, not Coehlo ...not that would make a difference. of course.

Ghordius's picture

+1, right you are, and a welcome correction. I wish we had more people correcting such things, here on ZH

Man Who Was Thursday's picture

This is not a Coup, however tense the situation seems. This is being resolved internally and I don't think we would look too kindly to outside interference. It would only serve to unified opposing parties.

Haus-Targaryen's picture

So Ghordo trying to correct me got corrected in his correction. 

Ghordius's picture

the path to verifiable truth. are you... interested in truth? your generation of Americans is truly near impossible to understand for me

but in general America is getting more and more difficult to understand, and it's not only me saying that

as if a djinn could appear, offer three wishes... and not even understand what those wishes are, except for vague doom-like scenarios

raios_parta's picture

Portugal has a comunist constitution, that forces the state to provide everything to everyone from cradle to coffin. It was written by the Marxists after the revolution.They made sure it cam't ever be changed by the people under any cicunstance, only by a 75% majority in the parliament, which is the same as to say it can't be changed. So the law that is there to limit the state can only be changed by the politicians. Nice one. The content of the constittution is ridiculous. You have probably never read it, have you? Everything is a right to everyone. A house, etc..



Ghordius's picture

the one I studied in the 80's does not seem to be the one you seem to have been reading

Perfecthedge's picture

I have read and studied our Portuguese Constitution and this guy has had too much Vinho Verde today. Ignore him Ghordius. Your statement above is correct.

Vlad the Inhaler's picture

No middle ground anymore....either corrupt Fasvism or....corrupt Socialism.  exactly what's happening here in America.  How did we get to the point of a Trump vs Sanders scenario, facsism vs socialism again just like Europe pre WWII.  We let the corporations take over the government and the media.

Noplebian's picture

It's all going nicely to plan......

terry44's picture
The migrant crisis is by far the biggest factor in the imminent collapse of the EU.
Devotional's picture

Listen, I live in Portugal - this place is borderline communist with 20% supporting Karl Marx policies.

Portugal's people want and desire socialism/communist leaning policies.

Pathetic is a word that describes this place very well.

Portugal <3 Commies.

VinceFostersGhost's picture



Standing in line for toilet paper yet?

NoDebt's picture

Nothing can stop the FSA.  And it's a worldwide phenomenon.

Ghost of PartysOver's picture

The FSA will open a huge can of whoopass on the MIC in the US and Russia combined.  The world is spinning out of control.  And fast too.  But still a ways off before the stuff gets real.

WillyGroper's picture


The FSA doesn't even know what the MIC is.

22winmag's picture

Free Shitters Without Borders!

11b40's picture

And why is that?  Why is the FSA growing all around the world?  Could it possibly be that the wealth has become so concentrated that those in the lower bounds of societies have been made dependent on free shit for survival?  Could it be that technology is eliminating JOBS so fast that passing out "free" shit is the only way to keep consumption high enough to please the multi-national corps & bankers who run the world?  Could it be that most of us are slowly becoming useless eaters?

BarkingCat's picture

That's a part of it.
The other part is - what you feed grows.
Governments in the West feed the FSA a rather
healthy diet. Only a small percentage of people is
highly self motivated. Majority will only do what is necessary
to survive. If they can survive by getting free shit
from the government then that is the extent of their efforts.
These people will have offspring that they will
pass their "wisdom" onto.

TeamDepends's picture

What a shame, such great surfing.

sbn's picture

Where in Portugal do you live? On Avante Festival?

Perfecthedge's picture

I live in Portugal too and pathetic describes you as well. If you are not happy: leave! We will be quite happy without people like you. Don't worry Portugal can handle this. We have been handling shit for the past 500 years and actually doing pretty well.

I hope that the Goldman Sachs-whore-shippers in this country get kicked hard by the communists. Enough of Durão Burroso and his cronies. Enough of Espirito Santo-Mafia-Clan. The winds are changing, or so I hope.

Man Who Was Thursday's picture


He can simply fuck off. Commies as they are, they're trying to kick some bankster's ass, so they're on my team.

raios_parta's picture

Anyone with a half a brain that doesn't have an untouchable pension has already left. Portugal is in demographic decline and there will be no one to support the pensioners in a few years. In 2009, the social welfare contributions only covered 12% of the state pension liabilities. You are going down much faster than you think.

HugoMorao95's picture

Cronies like Guterres and Socrates?

HugoMorao95's picture

Cronies like Guterres and Socrates?

ASACJon's picture

There was a conflict between communist Bolshevism and the Third Position some decades ago...

The good guys lost and now we have moronic skinny-jeans freaks running around as the low grade rabble to push for the latest and greatest in culture-less collectivism. 

But I take issue with one thing that I see often in these debates: Suggesting that the EU is a 'fascist' system opposed to a quasi social democratic movement of poor, innocent indebted PIIGS is a complete false narrative.

The current economic model in the EU is sort of a sterile plutocratic capitalistic socialistic hybrid that...

  • keeps the lion's share of production for a very select few (interlocking corporate boards, etc.) who have no sense of the noblesse oblige, or even have an inverted sense of cruel entitlement to plunder
  • forbids any authentic culture/connection with the past (so we get minimalist and degenerate art/culture)
  • it lacks any coherant purpose but to compel people to act as clinical (and atomistic) economic units of exchange (pure consumerism.)

Fascism is a manufactured term that can describe a number of approaches to national, political, and economic organized integration.  As the ANTIFA ilk use it, anyone who has a sense connection with his ancestors, sees life as something more than just consuming grades of hedonics, and values any order (e.g., objective truth, sense of moral virtue, national identity, transcendent purpose, etc.) is a problem to be expunged.  Note, I am being exceptionally kind in describing these ANTIFA folk.

I would suggest to ZH readers/poster that before using the term fascist as a pejorative, or even at all, research its origin.  And, more importantly, research the approaches that made up Third Position economics.   

general ambivalent's picture

Well said, there is an aspect of democratic ideology that seeks to bring in the opposition and convert them to a neutral doctrine of decentralised government. This is effectively the precursor to socialism and progressive reformism. Socialists are largely a pathological extreme of this democratic politics of conversion.

THE DORK OF CORK's picture

What's the bet they will also accept the bankers monopoly of credit.

Socialists and communists are used as agents of further centralization by the forces of financial capital.

We now have100s of years of historical evidence for this. 

WOD's picture

Mob Rule is what real democracy looks like asshats!

Johnbrown's picture

"...Like the European socialists, anarchists love secession. Unlike them, we love it out of principle. We love secession because it weakens the state. The state is nothing without a sizable geographic territory under its monopolistic command. Therefore, anarchists want a world of progressively smaller and smaller states, until the day that each individual is sovereign in his or her own right. So, when anarchists observe what is happening in Europe, they might ask themselves “Should we support the socialists’ efforts to secede? Should we support them even though we know their dastardly motivations? Should we support them, even though we know that if they succeed people who live in those regions will enjoy less freedom?” This is the key question that I will explore in this essay. To abstract and rephrase it: Which is preferable? A state of large geographic size that is largely laissez-faire or a geographically small state that is more interventionist? When faced with a choice between the two, which should anarchists prefer?

The question is critical because if anarchists ever hope to bring about a stateless world, we will need to think about how to deal with the existing state..."

Ghordius's picture

that anarchists love secession is easy to believe, but socialists? why that? further, what has secession to do with this article? exiting the eurozone isn't "secession"

BarkingCat's picture

It is from the European Central Bank.
However until a government can function on its tax collections it will never be truly free, no matter what
currency they use.

ToSoft4Truth's picture

Olive complexion?

Atomizer's picture

Another example of Socialists caught in the Ponzi scheme wealth transfer. This makes my day. 

Thanks Tyler. 

Sergeiab's picture

It's been a long time since an election disrupted the big agenda (I don't have any example in mind). They will probably suffer the same fate as Greece.