Week in review: Portuguese Government falls
In Portugal, the new centre-right Government supported by PSD and CDS was defeated in Parliament on Tuesday, after its programme was rejected by the remaining parties. The Socialist Party, that led the rejection, negotiated a series of agreements with four parties (Communists, Bloco de Esquerda, and the Green Ecologist Party) to attempt to form Government with their support. The coalition PSD/CDS won the October’s Parliament elections but without absolute majority, having elected 107 out of the 230 members of Parliament. The President Cavaco Silva has said that he will decide on the new Government in the week starting on 25 November, after having heard parties and other institutions about their preferences. The two major options for the President are to either name António Costa, leader of PS, or to keep the current Government as a caretaker Government until new elections can be summoned (sometime in the spring/summer).
On the data front, Portuguese GDP disappointed, being flat qoq in the third quarter (0.5% in the second quarter). The contribution of domestic demand was negative, mainly due to the decline in investment, while net external demand contributed positively, as imports of goods and services fell more sharply than exports. GDP was up 1.4%yoy. This lower that expected result associated with increased uncertainty related to the post-election developments may throw Portugal back into recession again in Q4, mostly through investment.
In Europe, GDP was up 0.3% qoq after 0.4%qoq in Q2. Among the largest economies, Germany’s GDP eased to 0.3% after 0.4% in Q2, Frances’ GDP was up 0.3%, Italy’s eased to 0.2% and Spain’s to 0.8%. This slowdown reflects weaker global prospects, as the effects of favourable factors such as low oil prices and a weaker euro start to fade.
In Portugal all eyes will be on the President as he will decide whether to name António Costa as PM or to keep the current Government in care-taking mode. In the US, the minutes of the Fed’s meeting will provide further guidance about the timing of the first rate hike.
- Portuguese Industrial Production 2014 – National Statistics
- Inflation (HICP),October – Eurostat
- United States Federal Reserve FOMC release minutes
- Statistical Bulletin – Bank of Portugal