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Bailout threat overshadows Portuguese elections
Published in Saudi Press Agency on 14 - 01 - 2011

Some months ago, Portugal's conservative
opposition was still backing the socialist government in its attempts
to stabilize the economy and to avoid an international bailout, according to dpa.
Yet as campaigning has gathered pace ahead of the January 23
presidential elections, the political atmosphere has deteriorated,
with the opposition increasingly attacking the government over its
handling of the economy.
Pressure on Western Europe's poorest country to seek a bailout
from the European Union and the International Monetary Fund (IMF) was
reduced this week as Portugal passed a key market test with a
successful bond auction.
However, Portugal's weak growth and high debt levels still make it
look like the next potential victim of the eurozone's debt crisis
after Greece and Ireland, exposing it to what many Portuguese would
regard as a humiliating financial rescue.
The elections will pit incumbent President Anibal Cavaco Silva,
71, a somewhat uncharismatic economics professor and former prime
minister, against Manuel Alegre, 74, a poet with a decades-long
parliamentary career.
Cavaco Silva belongs to the main opposition centre-right Social
Democratic Party (PSD), while Alegre has the backing of Prime
Minister Jose Socrates' Socialists and of the Left Bloc.
Cavaco Silva initially tried to rally the country's political
forces behind Socrates' austerity measures - including a 5 per cent
cut in public sector salaries - in an attempt to trim the budget
deficit from about 7 per cent in 2010 to 4.6 per cent this year.
Yet as market pressure on Portugal increased, the consensus was
broken, with the president saying that an eventual IMF intervention
would signal the failure of the government's economic policies.
Alegre, on the other hand, links his opponent with an allegedly
privileged and reactionary right which is helping market speculators
trying to "force the entry of the IMF into Portugal."
Many Portuguese have negative memories of the IMF which carried
out programmes in the country in 1977 and 1983, slashing social
benefits.
If Portugal is finally forced to apply for a bailout, the PSD and
the smaller conservative party CDS-PP have called for early
elections.
That - analysts say - would increase uncertainty and worsen
Portugal's economic woes.
While Portugal's public debt is not alarmingly high in European
terms, there is concern especially over the private debt. More than
600,000 Portuguese debtors owe banks more than 150 billion euros (195
billion dollars), according to the central bank.
The economy is expected to slide back into recession this year,
after growing 1.3 per cent in 2010. Unemployment is running at about
10 per cent.
The Portuguese presidency is largely a figurehead job, but Cavaco
Silva's economic expertise and reputation for efficiency were
nevertheless expected to help him take a clear victory in the first
election round, as happened in 2006.
If re-elected, the president is pledging to use all his powers "so
that Portugal finds the right direction" in addressing its economic
problems.
Allegations that Cavaco Silva pocketed undue capital gains when
selling shares of a holding company of the troubled BPN bank in 2003
appear to have done little to dent his credibility.
The battle for the presidency will be a "difficult" one, Alegre
admitted.


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