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November 24, 2015


Costa's last hurdle

Anibal Cavaco Silva handed Antonio Costa a list of six questions to seek more clarification before giving him the mandate to form a government. A meeting between the two men is scheduled for today. With these six questions he sought assurances that Costa’s alliance would pass not only a censure motion but also a confidence motion in parliament; that the budget will comply with the stability pact, the two-pack and six-pack, and the fiscal compact; and that they would be able to approve a 2016 budget. 

The president also called for guarantees that a Costa-led government would comply with international collective defence commitments made by Portugal, a NATO member. He also wants Costa to affirm the role of the Permanent Council for Social Dialogue, a tripartite group of labour and business leaders that consults with the government on policies. This was a request from the employers’ organisation. The last requirement is for the new government to maintain the stability of the financial system, and to clarify the position on New Bank and Banif in particular. Jornal de Negocios has the full document.

Antonio Costa answered those questions in the afternoon in a letter to the president. We don’t know what exactly he wrote, but Diario Economico wrote up what is already known. Costa said that a confidence vote had not been part of the discussion, emphasising that it was the censure motion that is the real deal-breaker. Costa already affirmed that the budget will be in accordance with the EU budget targets, even after integrating the PCP and BE measures into the budget, but that at this stage it is not possible to give a precise impact on the budget nor could they provide a calculation for the structural budget. Costa was seeking reassurances from his allies about the 2016 budget yesterday. Catarina Martins, the leader of the Left Block, told him that he should “not be looking for ghosts”, which he then interpreted as an assurance that the 2016 budget would pass indeed. The request for a role of the Permanent Council for Social Dialogue is new in the public discourse but Costa gave several signs that he wants to include the social partners in certain decisions including the minimum wage. As for the stability of the financial system, Costa only said earlier that New Bank presents a cost to the taxpayers without specifying what he will do once in government. As for Banif, he had hinted at problems but again it is not clear what is the outcome.

The presidential candidates criticised Cavaco Silva for issuing these last minute demands, according to this article. Frontrunner Marcelo Rebelo de Sousa considered it "strange and unusual" that the President required reassurances from the PS on the financial system, criticising that the question as such suggests that the financial system is not stable, which is untrue, he insisted. 

But what is the objective of those guarantees the president is seeking? Was it for the PS only or did he seek reassurances from the BE and the PCP as well? What if the president is not satisfied with the responses, would he go so far not to nominate Costa? The press assumes that he will nominate Costa anyway and that this is just a formality. Bruno Faria Lopes writes that the real objective is a different one. First, Cavaco Silva wants it to be known by the history books that he had doubts about the viability of a PS government supported by the Left Bloc and the Communists. Second, it signals to his successor that this alliance is to be watched closely and gives him this roadmap for it. 

Our other stories

We also have stories on the first survey evidence showing how terror impacted French economic confidence; on measures to curtail cash transactions in France; on the ESM disbursement to Greece; on the rise in defaults; on the consequences of the Italian bad bank solution; on how Spain reigns in on spending in Catalonia; on the impact of financial crises on political fragmentation; and on whether the ECB may be overreacting.

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