LISBON, Portugal— Portugal holds a general election Sunday when the country’s 9.7 million eligible voters choose a government for the next four years. Here are some of the issues:
What’s at Stake
Portugal is one of the eurozone’s smaller economies, representing less than 2 percent of the 19-nation bloc’s gross domestic product. But when things go wrong, it can feel much bigger.
Portugal’s near-bankruptcy in 2011 amid the eurozone debt crisis, which also knocked the wind out of Greece and Ireland, generated fears of a domino effect that threatened its larger neighbor Spain.
In the end, a 78 billion euros ($87 billion) bailout and deep cuts to pay and pensions, steep income tax increases and cuts in public services — as well as the European Central Bank’s stimulus programs — were enough to reassure investors to resume lending to debt-heavy Portugal.
The economy is now recovering. After three years of recession, it grew 1.5 percent in the first half of this year compared with the same period in 2014. The unemployment rate has fallen from a record 17.7 percent in 2013 to 12.3 percent last July.
The danger is that any sign of political instability or new debt concerns in Portugal could re-ignite market worries about the euro’s future and undermine other countries in the bloc.
“The situation is still very fragile in budget and economic terms,” says Joao Cesar das Neves, an economics professor at Lisbon’s Catholic University. Portugal “has come out of its coma but is still under observation.”
What It’s About
At the heart of the campaign is one word: austerity.
To climb out of their debt hole the eurozone countries adopted a German-led remedy of government spending cuts and tax increases. Critics of that approach say government spending should spur the growth that will help pay off debts.
Portugal’s center-right coalition government, made up of the Social Democratic Party and its junior partner, the Popular Party, has sided with German Chancellor Angela Merkel. It refuses to promise lower taxes, but says it will ease the fiscal burden as the economy improves.
