Government News: Top Stories

Early election derails Portugal reforms
by Barry Hatton

The Associated Press Translate This Article
4 December 2004

Lisbon, Portugal (AP) - When President Jorge Sampaio decided this week to call an early general election, he consigned Portugal to six months of virtual political paralysis it can barely afford.

Just as the country was girding for essential, long-deferred reforms devised to halt an alarming economic decline, political uncertainty has compromised hopes for a new start.

'A change of government is always bad. Lots of things grind to a halt,' said Francisco Sarsfield Cabral, a political columnist with the daily Diario de Noticias. 'The economy will remain very fragile.'

The political crisis comes at a bad time: Portugal, one of the European Union's smallest and poorest members, is being left behind by the rest of the bloc.

Recent figures show the country's economic growth has been lagging the EU average for the past four years and indicate it will continue to do so for at least another two, despite billions of dollars in development aid from Brussels.

The economy is such a mess that Portugal, one of the original 12 EU nations, now trails newcomers Slovenia and Cyprus in gross domestic product.

It is currently flailing to find a way out of a recession that was the worst in the EU last year, when the economy contracted 1.3 percent.

In recent years, international bodies such as the World Bank have repeatedly pressed Portugal to proceed with potentially painful and unpopular economic and social reforms, many of them to correct outdated legislation introduced after a 1974 military coup brought democracy.

The conservative government, which took office in 2002, had said it was determined to jettison antiquated practices that keep Portugal out of sync with modern Europe. It was in the process of setting in motion a raft of reforms in key areas.

Now all of those plans have been thrown into doubt.

Sampaio, a two-term Socialist president, on Tuesday ran out of patience with a government bedeviled by policy gaffes, a bungled organization and feuding between its members, and said he was dissolving Parliament.

A general election, due to take place in 2006, likely will be held in February. The slow, formal procedures that are so typical of Portuguese bureaucracy mean that by the time a new government takes office, six months could have passed.

Despite their blunders, the conservatives had been planning bold reforms to turn the nation around economically.

The government had pledged to whittle down the bloated and inefficient civil service and revamp the maddeningly slow legal system.

Plans to cut personal income tax and corporate tax are now on hold. The privatization of state-owned companies and long-delayed plans to build an Iberian energy market and high-speed rail links with Spain are back in limbo.

A new law scrapping rent controls - which deprived owners of profit, condemned buildings to neglect and choked the rental market - was due to come into force by the end of the year but is now shelved.

Perhaps just as damaging to Portugal's hopes for an economic recovery is the lack of political continuity as the nation contemplates the prospect of electing its third prime minister in eight months.

Recent opinion polls indicate the election will be a shoo-in for the main opposition Socialist Party - which has balked at tax cuts and likely will be softer on any reforms that endanger jobs. They have already said they will junk the rent law.

Copyright © 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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