Portugal: The EU’s managed democracy

The bail-out has been the perfect excuse for Europe to bypass Portuguese citizens entirely, says Leigh Phillips

April 18, 2011
6 min read


Leigh PhillipsLeigh Phillips is a regular Red Pepper writer and was previously a Brussels-based journalist and Red Pepper's Europe correspondent.

The European Union has crossed a line. It has intervened in the party-political process of one of its member states for the first time, and, exacerbating the transgression, in the midst of a bitter general election.

Portuguese citizens will still formally be allowed to vote how they like on 5 June, but while doing so, they will have very little if any choice over public spending, taxes, labour laws or the regulation of business.

Essentially all the policy decisions that governments can make, apart from those regarding defence and home affairs, have been amputated from the political process.

Ahead of the vote in Portugal, precipitated by loss of the parliament’s confidence in the governing minority centre-left Socialists and their resignation on 23 March, the wealthy countries in Europe, with the connivance of the European Commission and the European Central Bank playing the role of enforcer, have ordered the main political parties mid-campaign to put aside partisan politics for the sake of European financial stability and sign on to a crushing multi-year programme of austerity and structural adjustment.

Heading into a meeting of EU finance ministers in Godollo, Hungary on Friday, Lisbon begged its ‘European partners’ for a ‘bridging loan’, an infusion of cash that would have allowed the indebted country to keep the lights on until after the election.

Prime minister Jose Socrates insisted that as the head of a caretaker administration, he had no mandate to sign on to anything other than a short-term emergency cash infusion.

A three-year package of wage restraint, public sector cuts, privatisation and tax hikes designed – all supervised by the EU-ECB-IMF troika – in return for a roughly €80 billion loan with punishing interest rates slapped on top would have to wait until after the election and a government with a democratic mandate to negotiate.

But Lisbon was told that they did not have time for such democratic niceties.

‘Democratic legitimacy? It’s not necessary. Apparently they had some mandate when they made the request [for a bail-out]. So if they were empowered … to make the request, they are empowered to progress with negotiations,’ commission economy spokesman Amadeu Altafaj said of concerns that a caretaker government could not sign on to a bail-out package on the scale of those imposed on Greece and Ireland. ‘They simply cannot wait.’

Nevertheless, EU ministers remained nervous. The wheeze that they came up with to solve the problem was that if they forced all the political parties to sign on to the same agreement before the election, then it wouldn’t matter in the end how people voted.

The ‘main political parties’ must now negotiate amongst themselves and come to an accord on the austerity package. ‘In the context of a difficult political situation and forthcoming elections, it is essential in Portugal to reach a cross-party agreement among the main parties ensuring that such a programme can be adopted in May,’ EU economy commissioner Olli Rehn told reporters on Friday.

EU officials would not be drawn on exactly how opposition political parties would be picked to participate in the talks and who would do the picking. Two parties to the left of the Socialists enjoy the combined support of between 14 and 20 percent of voters, depending on the poll, but despite their level of support, they are certain to be excluded from talks.

But within minutes, the plan had already started to fray at the seems. A fed-up Portuguese finance minister declared that his party, whose leader, Socrates, is barely on speaking with his centre-right counterpart, would not negotiate with the opposition and that it was the responsibility of the EU and the IMF to do so.

A surprised Rehn then warned the country: ‘I trust all political parties of government and opposition realise their major responsibility in overcoming their current difficulties both for the sake of their own citizens and financial stability in Europe.’

‘Let’s not have a public dialogue every day,’ he said.

The head of the ECB, Jean-Claude Trichet, added that the bail-out negotiations were ‘certainly not for public’ discussion.

Remarkably this topic that is not for public discussion was the very policy that brought down the government. Socrates fell on his sword after he had failed to win support from the right-wing opposition for his latest austerity measures, the fourth such package in 12 months. Nevertheless, the new austerity programme, whose details must wait until after an assessment by troika experts who visit Lisbon this week to ‘open the books’, will be even tougher.

Further compounding the violation of Portuguese sovereignty and democracy, it is now emerging that it was the European Central Bank that pulled the plug on the Portuguese economy and forced the government to apply for a bail-out.

Last Monday, Portuguese banks announced they would stop buying government bonds if Lisbon did not seek a bail-out. Without the support of domestic banks, Socrates had no choice but to request an external lifeline.

On Thursday, although the ECB chief later denied it, the head of the country’s banking association, Antonio de Sousa, said that he had had ‘clear instructions” from the ECB and the Bank of Portugal to cut off the tap.

‘When it became clear that state financing needs implied more funding by banks, banks said this could not be done because they had clear instructions from the Bank of Portugal and ECB to do the opposite, to diminish their exposure and not increase it,’ he said.

There is no more important issue in this election than whether Portugal shall continue to cut ever more deeply and sharply to ensure the stability of core European banks who engaged in their own form of predatory lending to the EU’s periphery. But Brussels, Frankfurt and Berlin have declared such topics off limits.

This is just the most extreme, emergency version of what European elites would wish on all states. The new ‘economic governance’ rules approved last month affect all EU states, not just those in the eurozone, despite 10 Downing Street’s reassurances to the contrary, and are also in essence a prescription for taking key areas of policy, notably pensions, wages and wider questions of public spending, out of the realm of partisan politics, just as monetary policy has been politically neutered by its transfer to independent central banks.

Brussels officials regularly say that these issues are ‘too important’ to be ‘politicised’.

What they mean is that they are too important to be decided democratically, that they must be insulated from ‘irrational’ voters.

We are steadily moving towards a form of governance that is post-political, co-ordinated by  ‘experts’. The EU system has exploited the eurozone crisis to accelerate this tendency.

One irony in this process is that one of the main characters involved in this gelding of democracy, the European Commission’s Portuguese chief, Jose Manuel Barroso, in the 1970s was himself a fighter against the Salazar dictatorship. The irony that three and a half decades later, he would be one of the architects of the delimiting of Portugal’s relatively young democracy must not be lost on many of his countrymen.

But of course, he has long since ceased to be a politician. He is now an ‘expert’ too.


Leigh PhillipsLeigh Phillips is a regular Red Pepper writer and was previously a Brussels-based journalist and Red Pepper's Europe correspondent.


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