By: Dr. Mike Campbell
The general public has little or no mechanism to show its anger at the economic mess that financial leaders and politicians spawned that led to the global financial crisis. However, it is largely the man on the street that has to deal with the consequences of austerity measures, downturns in employment and rising prices as inflationary pressures around the world mount. Their only weapon is through the ballot box when incumbent administrations have to come to them to renew their mandates. The Irish financial crisis cost the government its mandate and the most recent recipient of a bailout, Portugal, has seen the same fated meted out to its administration.
The Portuguese Prime Minister, Jose Socrates, went to the people when his latest round of austerity measures was voted down in March. In the aftermath of this defeat, it was inevitable that the government had to accept an IMF/EU bailout package. The Portuguese people went to the polls at the weekend and Mr Socrates ruling Socialist people was roundly defeated. Mr Socrates has taken personal responsibility for the loss and has resigned his post as party leader.
What's Next?
The incoming administration will be led by the Social Democrats, probably in coalition with the conservative CDS party, but they will be constrained to follow a tough austerity budget as a condition of the IMF/EU bailout. Mr Passos Coelho, the Social Democrats leader, has pledged to do “everything possible” to ensure that Portugal adheres to the terms of the agreement. As he assumes power, Mr Coelho will be faced with a 12% unemployment rate and an economy which is predicted to shrink by a further 2% this year.
The public around the world will naturally hold “the government” responsible for the economic calamities befalling them. I suspect that it matters little if the government of the day presided over the crisis or not. The Portuguese administration will not be the last political victims of the global financial fallout.