Portugal's economic policy hits parliamentary roadblock

Despite initial optimism in Portugal over the resounding center-right Democratic Alliance (AD) victory last December, the Portuguese are once again faced with a political deadlock.

The country's constitutional watchdog, the Council of the Revolution, recently vetoed legislation opening up key areas of the economy to the private sector and warned that it would block any other laws that went against the "spirit of the revolution."

It was the third time that the council had vetoed the government law since its approval by the AD's parliamentary majority in March. In the intervening period the government had revised the original draft several times and returned it to the council for reappraisal.

The latest version specified that banking, insurance, oil refining, and cement -- nationalized after the 1974 revolution -- should be made accessible to the private sector. The law, however, stopped short of ful liberalization by maintaining that certain strategic sectors, namely steel, armaments, and petrochemicals were closed to anyone but public companies.

Originally the council had argued that the goverment's proposal was to sweeping and incompatible with the Constitution. The Constitution states that nationalizations in Portugal are "irreversible conquests of the revolution." But the government's latest draft was interpreted as a compromise solution by Portugal's Constituional Commission, which advised the council on legal matters.

By rejecting the commissionhs advice, left-wing military members have fueled the institutional conflict between them and the government.

Lucas Pires the parliamentary leader of the ruling AD coalition of Social Democrats, Christian Democrats, and Monarchists accused the council of tempting a major showdown with parliament.

"The legality of democracy has once again been sacrificed to the legality of revolution," he said.

However Lt. Col. Vitor Alves, the chief spokesman for the council insisted that the veto had saved Portugal from the old social injustices of the past. "The nationalized sectors in this country is not strong enough yet to compete successfully with a major return of private business," he said.

The battle lines have been drawn. Exactly who was winning the battle was far from clear, however.

Government officials are confident that they can make considerable mileage out of the council's veto. The democratic credentials of the governing parliamentary majority have been pitched against th e "obstructionist" policies pursued by a group of unelected military officers. This theme will undoubtedly be picked up with a vengeance during the run up to October's general election. The Democratic Alliance is pressing for a sweeping revision of the Constitution and the disbandment of the Council of the Revolution.

However the government's decision to back away from any further liberalization of the economy before October, in the light of the latest veto, may make its supporters turn away. As one political observer put it this "the image of strength and stability that the government has tried to project since it took office has failed at a crucial time."

The council's veto came only days before the holding of a major government sponsored conference aimed at boosting the confidence of the private sector. Six top ministers, including Deputy Prime Minister Diogo Freitas do Amaral and Finance Minister Anibal Cavaco Silva traveled to Oporto, capital of the staunchly conservative north of Portugal with a clear message: "The gloomy days of Socialism are over. The government supports you."

Over 1000 foreign and Portuguese businessmen gathered in Oporto's impressive stock exchange to hear the ministers deliver their package of incentives for the private investor. But despite promises of income tax reductions, generous credits, and a firmer hand with the Communist-dominated unions, not everyone was convinced.

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