Portugal: Conservative coalition likely to stay in power

With more than 90% of the votes counted, the results of the general election in Portugal came in broadly in line with recent polls: the PSD/CDS conservative coalition, currently in government, won again with 37% of the vote, but it fell short of an absolute majority of seats in parliament. The socialist PS was second with 32% of the vote, followed by the radical left BE with 10%, and the communist party with 8%. The PSD/CDS conservative coalition is likely to be nominated again as the new government, but this time without an absolute majority of seats in parliament.

If the conservative PSD/CDS coalition fails to secure the necessary support in the national assembly to form a government, then the socialist party (PS) could have a chance to take power with the support of BE (though still without an absolute majority).However, the lack of a government with an absolute majority could mean that further reforms may be difficult to approve. Political instability could potentially also result in early elections after one year.

A slowed reform agenda is to be expected in part because key areas have already undergone major reforms (ie, public administration, judiciary, social security, banking sector, and regulation of labour markets), but also because a minority government may not be able to pass through a fragmented parliament any ambitious reforms. Even with a majority in parliament, the conservative government coalition has experienced a few policy bumps, such as the constitutional court decisions overturning important fiscal measures on public pensions and wages, and the fallout of BES (the sale of Novo Banco is not yet completed).