Ambrose Evans-Pritchard — Defiant Portugal shatters the eurozone's political complacency

Antonio Costa, Portugal's Socialist leader and son of a Goan poet, has refused to go along with further pay cuts for public workers, or to submit tamely to a Right-wing coalition under the thumb of the now-departed EU-IMF 'Troika'.

Against all assumptions, he has suspended his party's historic feud with Portugal's Communists and combined in a triple alliance with the Left Bloc. The trio have demanded the right to govern the country, and together they have an absolute majority in the Portuguese parliament.

Mr Costa's hard-Left allies both favour a return to the escudo. Each concluded that Greece's tortured acrobatics under Alexis Tspiras show beyond doubt that it is impossible to run a sovereign economic policy within the constraints of the single currency.

The Communist leader, Jeronimo de Sousa, has called for a "dissolution of monetary union" for the good of everybody before it does any more damage to the productive base of the European economy.

His party is demanding a 50pc write-off of Portugal's public debt and a 75pc cut in interest payments, and aims to tear up the EU's Lisbon Treaty and the Fiscal Compact. It wants to nationalize the banks, reverse the privatisation of the transport system, energy, and telephones, and take over the "commanding heights of the economy"

Catarina Martins, the Left Bloc's chief, is more nuanced but says that if the Portuguese people have to choose between "dignity and the euro", then dignity should prevail. "Any government that refuses to obey Wolfgang Schauble must be prepared to see the European Central Bank close down its banks," she said.

Here we go again. Let's see if these folks fare any better than Syriza. Portugal might not be able to do it, but when it becomes Spain or Italy's turn, then the game will change and so will the odds. It's just a matter of time.

The EU Fiscal Compact requires Portugal to cut its public debt from 127pc to 60pc of GDP over twenty years, under pain of sanctions, with parallel cuts in Italy, Spain, France, and Belgium that feed on each other….

Go figure.

The currency bloc is in worse shape on almost every metric than it was before the Lehman crisis. Debt levels are 35 percentage points of GDP higher. EMU-wide unemployment is stuck at 11pc. The credibility of eurozone leadership is in tatters.

Powerful populist forces are waiting in the wings in Spain, Italy, and France. The events in Portugal have shown that every election in Southern Europe is a now an "event risk"….

The Telegraph
Defiant Portugal shatters the eurozone's political complacency
Ambrose Evans-Pritchard