Portugal turmoil worries Europe

Recent developments echo what happened in Greece this year

LISBON, Portugal — An anti-austerity alliance including radical leftist parties takes power. A shaky economy and huge debts menace the national economy. The rest of Europe watches with a wary eye.

Sound familiar? It’s not Greece, but another eurozone country: Portugal.

A nation that just months ago was hailed as an example of how to follow through with budget austerity measures has become a new source of concern in Europe.

A left-wing coalition has unseated a center-right government that introduced the deep spending cuts and steep tax hikes demanded since 2011 by creditors during Portugal’s $82.6 billion bailout.

The developments echo what happened in Greece, whose radical leaders this year almost crashed the nation out of the eurozone.

The situation

Led by the moderate Socialist Party, which took office Thursday, Portugal’s new administration will be backed in Parliament by the Communist Party and the radical Left Bloc and Green Party.

Their rise and rhetoric bring to mind the radical Syriza Party in Greece and its dramatic clashes this year with its eurozone creditors. Syriza initially refused to agree to more budget cuts, and the creditors responded by almost pushing Greece out of the euro. The new government in Lisbon — the country’s second-largest ever, with 17 ministers and 41 deputy ministers — is taking up a similar battle cry, vowing to “turn the page” on austerity. That kind of rebelliousness alarms investors, who like predictability.

The similarities

The people of Portugal and Greece have both been hit hard by years of budget cutbacks.

Greeks have struggled with a surge in poverty and unemployment, with an election last January bringing to power left-wing Prime Minister Alexis Tsipras and his Syriza Party.

Tsipras clashed with creditors over the austerity, almost bringing Greece out of the euro. Since then, Tsipras has had to reverse course. He has accepted the creditors’ demand for tax hikes and dramatic cuts in pensions and spending in return for a new 86 billioneuro bailout.

In Portugal, a similar anti-austerity backlash was predictable in a general election last month when anti-austerity parties together collected more than 60 percent of the vote.

The differences

Despite the parallels in government, there are reasons to believe Portugal will not follow Greece’s turbulent path.

While Portugal fell short of its goal of being like Ireland, another bailout recipient whose economy is flourishing, after three years of recession it grew 1.5 percent in the first half of this year compared with the same period in 2014. The unemployment rate has fallen from a record 17.7 percent in 2013 to 11.7 percent in the third quarter. By fulfilling its bailout plan of austerity measures, Lisbon has been able to emerge from the program’s system of regular reviews by creditors.

No such relief for Greece, where the government expects the economy to remain in recession through 2016, with unemployment stuck at more than 25 percent and the national debt ballooning to reach 188 percent of annual output.