After Economic Crisis, Portugal Faces Political Vacuum

By Miriam Krule

Portugal's Prime Minister José Sócrates tendered his resignation on Wednesday after the opposition rejected his deficit- and debt-reduction plan. As the country seeks to regain investor confidence, many wonder if they will enlist the European Union to bail them out -- as Greece and Ireland already have.

But there's another, perhaps more pressing question than whether or not Portugal will ask for a bailout. With the country facing political crisis, who would have the authority to negotiate such a deal? Sócrates' resignation created a political power vacuum and the consensus among European leaders is that it would be pointless to negotiate a long term deal with leaders who may depart office in the near future. That was the case with Ireland, in which the EU agreed upon a bailout plan, only to be lobbied by the new Prime Minister Enda Kenny for easier terms.

As the country awaits an early election there are a few possibilities for who will take control in the interim.

Aníbal Cavaco Silva, Portugal's conservative president, will now begin meetings with political parties in an effort to fill the void. In the two or three months before a new election can be held, he might try to put together a "grand alliance" of the main parties. Or he could appoint a transitional, non-partisan, "technical government". A third option is to keep Mr Sócrates as a caretaker with limited powers.

Gilles Moec, head of European economic research at Deutsche Bank, suggests a "technical cabinet" would be better placed to negotiate a bail-out.

Discussion of Portugal's political and financial turmoil will loom large at this week's EU summit, which may put off a deal to expand the bail-out fund.

Read the full story at The Economist.

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http://www.theatlantic.com/international/archive/2011/03/after-economic-crisis-portugal-faces-political-vacuum/72984/