The Portuguese Socialist Party sweep to victory but is this the end of their economic insurgence?

Three days ago, Portugal’s Socialist party (PS) won a huge mandate in their general election. Antonio Costa’s party won 36.6% of the vote winning 106 seats in their Parliament. Portugal stands alone in Europe as a place where progressive politics are hugely dominant. PS will most likely head into government with Left Bloc or CDU support.

Not only are their socialists about to enter their 2nd term in power they remain one of the few nations that uses proportional representation to have zero far right presence in their parliament. This success story can be traced to the hugely impressive economic recovery the government engineered.

However, with the Socialist Party gaining more power, oddly this may mean the end of radical political vision. Portugal’s economic recovery can be traced from the left-wing coalition that has ruled the country since the General Election in 2014. PS came 2nd but entered government with the left bloc and Portuguese communist party following years of austerity after a bailout. Portugal was one of the worst sufferers post the financial crash.

The conservative Portuguese Social Democratic party embraced austerity, CTT, public mail company and REN, national electric network, freezing public sector pay and raising regressive taxes like VAT. Education got a 23 per cent spending cut, and health and social security went the same way.

The result was 17.5 per cent unemployment in 2013, a 41 per cent jump in company bankruptcies and year after year of net economic decline.

The left took on the gauntlet in 2015 imposing a Keynesian approach to the economic crisis that many were highly sceptical of. PS enacted a reversal of the majority of the cuts while regaining this revenue from taxes on the richest.

The Troika reforms enacted by the previous government were overturned, a 30% increase in spending, while increasing the minimum wage, reversing VAT rises and reintroducing scrapped holidays.

They funded this by adding tax brackets at the top of the income scale while introducing taxes on sugar and increasing it on other luxuries.

The program has proven to be nothing less than brilliant. The economy has grown in every year since they took and Portugal’s economic growth was higher than the EU average in recent years, 2.4 percent in 2018, while unemployment rates fell to the level before the debt crisis.

Miraculously this has been achieved while reducing the deficit which is now almost zero, a historic low. However, this is unsurprising as tax has been levelled on those with the greatest ability to pay. This means spending is retained in the economy while tax take is not decreased. The economic program was designed eloquently to grow the economy and use this growth to reduce the public deficit.

However, such economic quality may be lost due to PS’s large win. A significant number of the policies that have been critical in Portugal’s recovery were only implemented due to their need for support from the 2 far left parties. 

The Left Bloc have struggled to increase their vote share in line with PS. They pushed for more infrastructure spending as well as a nationalisation program. Speaking to Joana Ramiro, a Portuguese journalist, she expressed her dissatisfaction with PS’s progressive credentials.

She said: “Calls for the re-nationalisation of main services, like those lead by the Labour Party, are something PS won’t hear a word of.”

PS’s current manifesto wants to keep the deficit low with controlled spending, but will increase public investment in the national health system and in transport system. This is on top of raising pensions and the minimum wage.

Many on Portugal’s left say this does not go nearly far enough to repair their struggling public services and run-down infrastructure. Their coalition partners may make this more progressive but at present PS offer run of the mill social democracy.

However, the left’s economic program over the last 5 years has helped PS gain a comfortable mandate for governing. While they may not be pushing the edges of radical reform, they show the EU’s left that rejecting austerity is key to winning back support.