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Portugal continues its progression

Socialists now rule in Portugal, but they are as eager as their predecessors to work towards European monetary union. David Sutton reports.

A EUROMONEY SURVEY - MARCH 1996

Socialists stay on course Arrogance can be lethal for a government. Portugal's social democrats (PSD) discovered this first-hand at last October's general election and in the Janaury 1996 presidential election when after a decade in power they were defeated by the socialist party. But the change of government seems to have been less the result of a leftward shift among voters than a desire for vengeance and revenge against the "dictatorial" PSD. The political fallout has had a positive effect on the markets, with the consensus being that there is little to fear from the new government. With the socialists in charge of both parliament and the presidency (the president is parliamentary arbiter empowered to dissolve parliament and call general elections), government stability should be ensured. Antonio Guterres, the socialist leader, and Jorge Sampaio, the socialist president, have indicated that Portugal's full involvement in European economic and monetary union (EMU) is the main objective of policy, with improvement on past gains the underlying theme. In a further move aimed at convincing the markets of their stringent fiscal ideology, the socialists appointed António Sousa Franco (a non-socialist) as finance minister.