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Pedro Passos Coelho, the prime minister, called twice over the weekend for a pact with the centre-left Socialists, the main opposition party, that would set limits on public expenditure to 2017 in an effort to ease government borrowing costs after Portugal’s planned exit from its €78 billion bailout in June. But António José Seguro, the Socialist leader, rebuffed the proposal for a “memorandum of confidence”, saying his party would not be complicit in “the government’s strategy for impoverishing the country”.
Mr Seguro’s snub to the prime minister is likely to renew investor fears that political friction could undermine Lisbon’s commitment to hold down government spending after exiting its bailout. Standard & Poor’s on Friday removed Portugal from “creditwatch”, which indicates a higher chance of an imminent downgrade, but maintained Lisbon’s rating at BB with a “negative outlook”, that is, two notches below investment grade, or “junk” status.
Mr Seguro said he would not be made “an accomplice of the government” in making more cuts to pensions and public sector wages. The Socialists were committed to balanced public accounts, but would achieve this through “a strategy for job and wealth creation”.
The prime minister said Portugal had “everything to gain” if the government could reach agreement with the Socialists by April on fiscal targets for the next three years. But the country would “continue to make progress” if a deal could not be negotiated, he said.
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