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“The government has the support of an unequivocal majority in parliament”, Cavaco Silva, who has the power to dissolve parliament, said in a speech in Lisbon last night. Portugal’s bonds rose, extending a three-day rally that has wiped more than 80 basis points from 10-year borrowing costs. Coelho won the endorsement only after the ruling coalition parties and the opposition Socialists failed to reach a consensus pact that Cavaco Silva said would have been “the ideal solution". The prime minister said on July 18 that uncertainty over a vote could harm the country’s efforts to regain access to the bond market.
Portugal has 11 months left to exit its European Union-led bailout plan. Coelho, 48, is backed by his Social Democratic Party and the smaller conservative CDS party, which together have a majority of seats in parliament.
The president asked the three parties to reach a “national salvation” agreement that would help Portugal complete its aid programme through June 2014, according to his July 10 speech. He also urged them to ensure debt levels will be sustainable for a new government after the bailout. The parties failed to agree on measures to complete the bailout plan after six days of talks, Socialist Party leader Antonio Jose Seguro said on July 19. The Socialists oppose the coalition government’s planned €4.7 billion of spending cuts. They led the Social Democrats by 12 percentage points in a poll published on July 12, and have called for early elections.
The government will now ask parliament to approve a confidence motion, said Cavaco Silva, who is a former prime minister and Social Democratic Party leader. Parliament on July 18 rejected a censure motion against the government presented by the Greens.