Portuguese Socialists win election, look for coalition partners

Emerging from an election with 36.6% of the vote, Portugal's Socialists look set for four more years in government. Who will join them is less clear.

First Look

Portugal's Socialist Party had little time Monday to savor its general election victory, as tough negotiations for parliamentary support loomed and the economy braces for leaner times.

The center-left Socialists won Sunday's general election with 36.6% of the vote and are preparing to govern for another four years.

The main opposition Social Democratic Party came second with almost 28%.

The Socialists, however, are 10 seats shy of a majority in the 230-seat parliament. To ensure that its legislation is approved, the government will need support from other parties.

A healthy economy, with growth of 2.1% last year and unemployment at around 6%, helped the Socialist Party back into the Sao Bento Palace, the seat of power in Lisbon.

The Socialists have also earned praise around Europe for taming Portugal's chronic overspending, with Finance Minister Mário Centeno bringing the budget deficit close to zero this year.

António Costa, the Socialist leader and incumbent prime minister, said in his victory speech that he intends to continue his business-friendly policies and prudent fiscal management.

But economic troubles are brewing in Europe, and once the election results were known the radical Left Bloc and Portuguese Communist Party – the most obvious candidates for an alliance – were quick to issue demands for more spending.

The Left Bloc snared 19 seats and the Communist Party got 12.

Left Bloc leader Catarina Martins said her party's demands in return for support would include the re-nationalization of the national postal service CTT, which was privatized in 2014, and a boost in public investment in housing and transport.

The Communists want the minimum monthly wage to rise to 850 euros ($932) from 600 euros, an increase in pensions, and free pre-school for all children up to 3 years old, among other things.

The next government faces plenty of economic challenges, too.

Apart from signs of a broad slowdown in the European Union, looming on the horizon is the United Kingdom's impending departure from the EU, now scheduled for Oct. 31. The U.K. is one of Portugal's main export markets.

Portugal also has a government debt equivalent to more than 120% of its gross domestic product – the third highest in the EU – so any interest rate rise could be deeply damaging.

The country's aging population, meanwhile, is threatening the financing of Portugal's welfare system. The EU says at current fertility rates, the number of Portuguese will decline from 10.3 million this year to 6.6 million in 2100.

Climate change is another problem, especially in the southern half of the country where rainfall is increasingly scarce.

It may take several weeks of negotiations before a new government takes office.

This story was reported by The Associated Press.