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Why We’re Ungovernable, Part 11: Portugal Stages A Coup

Wow. Portugal just did something extraordinary.

In its most recent election, parties of the left — anti-austerity, anti-business, mistrustful of the euro and other extra-national institutions — gained a parliamentary majority, which gives them the right to form a government.

But the president, whose permission is necessary for the process to go forward, said nope, that’s not going to happen, thus setting off a constitutional crisis that might be a sign of things to come in the eurozone. Here’s a brief excerpt from a longer must-read article by the Telegraph’s Ambrose Evans-Pritchard:

Eurozone crosses Rubicon as Portugal’s anti-euro Left banned from power

Portugal has entered dangerous political waters. For the first time since the creation of Europe’s monetary union, a member state has taken the explicit step of forbidding eurosceptic parties from taking office on the grounds of national interest.

Anibal Cavaco Silva, Portugal’s constitutional president, has refused to appoint a Left-wing coalition government even though it secured an absolute majority in the Portuguese parliament and won a mandate to smash the austerity regime bequeathed by the EU-IMF Troika.

He deemed it too risky to let the Left Bloc or the Communists come close to power, insisting that conservatives should soldier on as a minority in order to satisfy Brussels and appease foreign financial markets.

Democracy must take second place to the higher imperative of euro rules and membership.

“In 40 years of democracy, no government in Portugal has ever depended on the support of anti-European forces, that is to say forces that campaigned to abrogate the Lisbon Treaty, the Fiscal Compact, the Growth and Stability Pact, as well as to dismantle monetary union and take Portugal out of the euro, in addition to wanting the dissolution of NATO,” said Mr Cavaco Silva.

“This is the worst moment for a radical change to the foundations of our democracy. After we carried out an onerous programme of financial assistance, entailing heavy sacrifices, it is my duty, within my constitutional powers, to do everything possible to prevent false signals being sent to financial institutions, investors and markets,” he said.

Mr Cavaco Silva argued that the great majority of the Portuguese people did not vote for parties that want a return to the escudo or that advocate a traumatic showdown with Brussels.

This is true, but he skipped over the other core message from the elections held three weeks ago: that they also voted for an end to wage cuts and Troika austerity. The combined parties of the Left won 50.7pc of the vote. Led by the Socialists, they control the Assembleia.

The conservative premier, Pedro Passos Coelho, came first and therefore gets first shot at forming a government, but his Right-wing coalition as a whole secured just 38.5pc of the vote. It lost 28 seats.

The Socialist leader, Antonio Costa, has reacted with fury, damning the president’s action as a “grave mistake” that threatens to engulf the country in a political firestorm.

Mr Costa vowed to press ahead with his plans to form a triple-Left coalition, and warned that the Right-wing rump government will face an immediate vote of no confidence.

The point of this series of posts is that debt works the same way for countries as for families: Borrow too much and life becomes unmanageable.

For Portugal, as for most eurozone and indeed most developed world countries, the borrowing binge of the past 30 years has left no palatable solutions. Staying the present course means continued austerity, which in turn means a long slow descent into poverty for most citizens, who understandably want to avoid this fate. But installing an anti-austerity (and therefore anti-euro) government means a Greek-style crisis that accelerates the slide to Third World status. And that’s pretty much it as far as national-level options go.

No surprise, then, that European voters are skewing both far-right and far-left. While Portugal is bringing communists into the government, France, for instance, is going the other way. See French far-right Le Pen family set for regional power wins: poll.

This means several things. First, the euro crisis is about to enter a new, even more dangerous stage in which democracy — already diminished by the beating Greece took when it defied Germany and the IMF — might soon be banned in favor of solidarity. Put simply, the eurozone might become a de facto dictatorship in which elections, when they’re held at all, don’t matter.

Second, while there are no national solutions to the eurozone debt crisis because member countries no longer control their own currencies, there is a regional fix, which is to aggressively devalue the euro. That will partially satisfy the left by making money easier and (presumably) growth faster, as exports to the rest of the world pick up. Coupled with immigration restrictions to placate the right, a major devaluation might calm things down for a while.

Which is why over-indebted countries from time immemorial have used devaluation to get out from under past mistakes. At a certain point it becomes the only way to prevent a revolution.

But of course it’s only a temporary fix. Devaluing the euro by, say, 50% would send its over-leveraged trading partners into crisis, forcing them (not that they need much prodding since they’ve got basically the same problems as Europe) to devalue in turn. Until, as Jim Rickards likes to say, they figure out that the one thing they can all devalue against is gold.

21 thoughts on "Why We’re Ungovernable, Part 11: Portugal Stages A Coup"

  1. It seems like a reasonable, responsible and prudent thing for the president of Portugal to do. Allowing a Greece-Syriza scenario to play out in Portugal would be hugely destructive to the people of Portugal.

    1. How about the Will Of The People ??? .. does that matter little to you ?? .. That would be a Dictatorship – Hello ? .. and end up like america ..

  2. “This is the worst moment for a radical change to the foundations of our democracy.”

    Is this dude an insane jackass or what? IF one man can crush the will of the people, then “a democracy” is not exactly how I would describe the government.

    Just like that idiot in Greece, this guy should be dragged from his office and torn to pieces by the crowd.

    1. But unless I misunderstood, their constitution explicitly gives the president the right to “crush the will of the people” in this case. If that constitution was enacted democratically, then it is indeed a constitutional democracy, just like the USA.
      I do like the way that you demonstrate how democracy leads to mob violence, though.

      1. Bad news. Democracy ALWAYS leads to mob violence, it is in fact the very core of Democracy, mob rule. We, here in the USSA are not a democracy, We are a representative republic.
        But as to not look down on democracy I will add that violence is at the root of EVERY form of government. Just in democracy it is the people who are the perpetrators of violence. In most other forms of government it is the government who perpetrates the violence.

  3. It is time for the PURGE!!!

    Ok, I’m heading down to Uruguay. Workin’ as a farm hand on the Bush
    ranch. I’m sure that’ll work out just great. Obomber’s already plotting to
    get away.

  4. Some clarifications: Since the 1st democratic elections in 1976 that followed the 1974 military coup that ousted the dictatorship, Portugal has had 18 mainly coalition governments.

    Portugal’s semi-presidential system conveys certain significant powers on the head of state namely the nomination of a PM after an election.

    Parliament is elected on a complicated Hondt proportional representation system designed to ensure that no party ever wins an overall single party majority in the house (because of initial fears of a return to dictatorship)

    In the 41 years since the revolution Portugal has only ever had two single party overall majority governments both run by Anibal Cavaco Silva, the economist and former central bank deputy governor who is now the directly elected centre-right President.

    The latest election returned the governing centre-right coalition to power but with only 99 seats in the 230-seat parliament. Thus it fell 17 seats short of what it needed for an outright stable majority and was unable to find a willing coalition partner to sustain it. It is outnumbered by MPs from the Socialist Party, the hard left ‘Bloc de Esquerda’ with 10% of the vote, and 19 seats, and the rump (still Stalinist!) Communists with 8% of the vote.

    The presidential decision to reappoint the outgoing government despite its minority status is nothing new in the history of Portugal’s often bumpy democracy. It means effectively that the new government will be defeated by the combined opposition on a motion of confidence when it tables its budget and new elections will be called. The hope is that the voters will then clarify if they want a centre-right or a leftwing majority coalition to rule

    It is no more of a crisis than all the others that have left Portugal resembling post- Mussolini Italy in terms of the stability or otherwise of its democratic institutions. The voters are well used to their laborious political system and will keep on voting until a stable government emerges.

  5. its truly amazing how little if no coverage this huge huge story is getting, apart from aep no one it seems is interested in democracy, they just see this kind of coup as……normal,,,,,,dangerous times ahead.

  6. “over-indebted countries from time immemorial have used devaluation to get out from under past mistakes. At a certain point it becomes the only way to prevent a revolution.” By devaluation, you mean inflation, and that has certainly been a recipe for revolution, from the French Revolution to Weimar Germany’s hyperinflation. What adds fuel to the fire is corrupt “leaders” who have, in the process of burdening their people with new debt, as in Greece, have feathered their own nests in the process.

  7. Wow.

    War is coming John.

    Once the people’s will and freedom to choose is destroyed, the people will lose it.

    1. I disagree George People are sheep as long as they are fed, placated,served, allowed to stay in place, work etc etc….it will take great starvation dislocation repression to rouse them to revolt. austerity comes close, but not enough to risk it all in war

  8. Sort like here with the Tea Party holding our government hostage to stop funding something they don’t like the woman’s right to choice. A disgusting minority that is delusional with power.

    1. LOL… actually, you seem to have the point precisely backwards, the left in the US wishes to continue spending money it doesn’t have… that’s what the left in Portugal wants to do, also. Unfortunately, printing eventually devalues currencies and then everything crashes.

      Money is something like gold, silver etc.
      Currency is play money the ruling classes like because they can muck about with it.

      Also, Dan, let’s call a spade a spade: it’s an abortion, not a choice. Sure, it’s mostly black/latino babies that are being murdered ( by design ), but you don’t have to be so proud of it. Racism is such an ugly thing, Dan. Do you so hate brown people that you want to murder them? “Kill the nits, to get rid of the lice.”

      Do you keep your KKK robes in the barn or the garage?

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