“This is a night for Portugal to celebrate this change. We have our work cut out, but we aren’t afraid of working.”
— Pedro Passos Coelho in his victory speech.
There is no doubt that the new Prime Minister of Portugal, Pedro Passos Coelho, is up for a challenge. With the country facing a dire economic crisis, this newcomer must not only face the task of acquainting himself with his position but also the daunting mission of steering Portugal through the strict bailout guidelines imposed by the European Union and International Monetary Fund. Determined to succeed, Passos Coelho knows the future of his country’s economy and its potential to become a valuable member of the EU is at stake.
Still, Passos Coelho is a relative novice when it comes to government affairs. Despite a short political career in his youth, no one anticipated Coelho would eventually become the prime minister of Portugal, let alone during a financial crisis. Not until he unsuccessfully ran for president of the Social Democratic Party (PSD) in 2008, and subsequently won the position in 2010, did his name begin to surface in Portuguese politics. And now as the country’s top leader, Passos Coelho’s strong will to re-establish international confidence in Portugal’s economy reflects his belief, despite the naysayers, that, “there are moments when experience matters less than common sense and the capacity to change.”
The son of a country doctor, this 46-year-old spent most of his childhood in the 1970s in Angola, then a Portuguese colony, where his father practiced medicine. In tune with his country’s disgruntled history of decolonization, his family moved back to Portugal after the “Revolution of the Carnations” in 1974. Like his father, Passos Coelho joined the PSD youth group as a young boy, eventually becoming president of the organization in 1991. After a short stint in politics, including becoming a member of Parliament, Passos Coelho was awarded an economics degree from Lusíadas University at 37, and began working at a series of low-profile companies as a consultant and executive. Leaving the business world behind, Passos Coelho switched back to politics in 2008.
I have worked as a manager and administrator in companies and never led one to bankruptcy.
— Passos Coelho, on adopting fiscal austerity.
This political path led to his election as leader of the PSD where he distinguished himself by refusing to approve a fourth austerity measure offered by his Socialist predecessor Jose Socrates. Although Socrates was trying to avoid outside help from the EU, Passos Coelho couldn’t support another plan that would raise taxes instead of cutting expenditure, saying, “[the Socialists] do not address the heart of Portugal’s main economic challenge, which is to ensure that growth goes hand in hand with fiscal discipline.” His decision led to the forced resignation of Socrates and his eventual election to office with 39% of the vote.
Now only a month into this position, Passos Coelho believes he can help address Portugal’s growing financial problems. Yet, it is his business skills, not political experience, that he claims will help him do so. As one of Europe’s PIGS*, Portugal is the third country in the Euro-zone to ask for a bailout due to its burdening debts and lack of economic growth. This businessman believes his struggling country needs to adopt an austere attitude, saying, “I have worked as a manager and administrator in companies and never led one to bankruptcy.” Passos Coelho is a firm proponent of fiscal discipline and a frugal man who flies economy class to his EU conferences. To avoid becoming like its European counterpart, Greece, he strongly advocates that Portugal strictly reform its constitution, make businesses more competitive, decrease expenditures and privatize the central bank, along with other EU and IMF regulations.
Addressing these issues in his victory speech, this father of three channeled Barack Obama’s famous electoral tagline, “Change We Can Believe In,” inspiring the Portuguese people to face the difficulties of reforming the country’s ailing economy with “courage.” Looking at two years of recession and an unemployment rate at 12 percent, Passos Coelho is resolved to “go beyond” what the IMF and EU outline in their bailout package to ensure a prosperous future for Portugal. He wants to “surprise” investors with the country’s change.
Still, not everyone is a fan of Passos Coelho’s ambitious plan to steer Portugal out of its financial woes. In fact, Jose Socrates believes he is the reason why Portugal is in such a financial hole, citing Passos Coelho’s refusal to approve the country’s fourth austerity measure. The former prime minister believes this decision tethered Portugal with a 78 billion euro bailout package. In addition, many, like Socrates, also believe he might be unprepared for the title of Prime Minister.
With Portugal teetering on the edge of deeper economic turmoil, it has never been more important for Passos Coelho’s actions to speak louder than his ambitious words. In July 2011, Moody’s Investors Service downgraded Portugal’s debt rating to junk status, leaving the country’s economy at the bottom of the investment grade range. What’s more, the new prime minister discovered a budget gap of over 2 billion euros from the previous administration, leading to another austerity measure. With a grim outlook for Portugal’s economic revival, Passos Coelho must show the world that he can effectively deliver the change his country needs without requiring a second bailout. He will have to employ every bit of his determination to keep Portugal from becoming the piece in the puzzle that puts the EU economy at risk.
The preservation of Portugal’s integrity is in Passos Coelho’s control. And the proof will be in the pudding, as they say, as to whether this businessman’s “common sense and [his] capacity to change” can trump that of a seasoned politician.
* A four letter acronym that refers to the European countries Portugal, Italy, Greece and Spain, which are at the center of the European debt crisis. Including Ireland, the countries are often referred to as PIIGS.
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© Thomas White International, Ltd. 2019