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Cablegate: Portuguese Elections -- Socialists Ahead, Still

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PP RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSL RUEHSR RUEHVK
RUEHYG
DE RUEHLI #0510/01 2661540
ZNR UUUUU ZZH
P 231540Z SEP 09
FM AMEMBASSY LISBON
TO RUEHC/SECSTATE WASHDC PRIORITY 7875
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC

UNCLAS SECTION 01 OF 04 LISBON 000510

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV PREL SCUL SOCI PO
SUBJECT: PORTUGUESE ELECTIONS -- SOCIALISTS AHEAD, STILL
TOO CLOSE TO CALL

REF: LISBON 493

1. (U) Summary: With the September 27 parliamentary
elections just days away, the Socialists (PS) led by Prime
Minister Jose Socrates have a three-point lead over the
Social Democrats (PSD) led by Manuela Ferreira Leite.
However, a significant portion of the electorate -- 24
percent of those intending to vote -- remains undecided and
could sway the final result. The campaign season has been
rife with scandals and rumors tarnishing the images of the
two main parties and distracting voters from substantive
issues. Despite a series of televised debates focused on
issues, this election, as those in the past, will largely be
personality-driven: Portugal's "Iron Lady" Ferreira Leite,
viewed as determined and credible, versus incumbent Socrates,
regarded by some as arrogant and by others as charismatic and
progressive. Possible post-electoral scenarios include a
minority PS or PSD government, or a coalition government
including one or two of the smaller parties. End Summary.

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Leading Parties Differ on Role of State
---------------------------------------
2. (U) Platforms of the ruling Socialists (PS) and the
opposition Social Democrats (PSD) generally converge in three
key areas: foreign affairs, defense, and European issues.
The fundamental difference between the two parties is how
they view the role of the State in society. According to
Jose Luis Arnaut, PSD International Relations Committee
Chairman and former President of the Parliamentary Commission
on Foreign Trade and Portuguese Communities, the PSD favors
less state intervention, while the Socialists believe in
greater state involvement. The PSD favors market-based
solutions over government subsidies.

3. (U) Another key difference is in the area of economic
policy. Portugal's growth has lagged behind other European
countries in recent years, and the economy is expected to
contract 3.4 percent in 2009. The PSD believes the key to
boosting growth is to cut public spending and stimulate
private sector investment. PSD leader Ferreira Leite, who
has been described as Portugal's "Iron Lady," has pledged a
"titanic" fight against infrastructure projects to reduce
what she calls the country's "unsustainable" debt levels,
while the ruling Socialists have promised to launch large
infrastructure projects. The Socialists assert that such
projects, including a high-speed rail-link to Spain and a new
airport for Lisbon, are key to hoisting Portugal out of its
worst recession in decades due to the global economic crisis.


4. (SBU) PSD leader Ferreira Leite argued for suspension of
construction of the high-speed rail-link between Portugal and
Spain during a nationally televised September 12 debate with
PS leader Socrates. Her comments sparked PS criticism of the
PSD leader as "provincial" and "isolationist." The PSD
defended its position, citing the need to put Portuguese
national interests first, particularly in the face of growing
public debt. Arnaut acknowledges that the PSD supported
construction of the high-speed train in 2003, when Ferreira
Leite was Minister of Finance, but now proposes postponement
of the project to curb public spending. On foreign policy,
Arnaut maintains that the Social Democrats are more
pro-Atlantic than the Socialists, and noted that the
trans-Atlantic relationship has been the PSD's number two
priority in foreign affairs (after relations with the EU).

5. (SBU) The Socialists, for their part, seek to reinvigorate
the economy, promote employment and social policies
benefiting the middle class, and advance same-sex marriage.
They also seek to introduce a referendum on regionalization,
and revise the electoral law to re-configure the current
electoral districts. Jose Lello, PS National Secretary for
International Relations, characterizes the Socialist Party as
a progressive movement that focuses on modernization,
infrastructure, renewable energy, and export of technology.
He stresses the success of major reforms initiated by the
Socialist government over the past four years and the
importance of sustaining those reforms, which the Socialists
fear a PSD government would roll back.

6. (SBU) Lello notes that the PS government has made a
significant investment (1 percent of GDP) in science and
research, as well as in education. On the economy, he
underscores his party's success in reducing the budget
deficit from 6.7 percent of GDP in 2006 to 2.6 percent in
2008, and points out that Portugal's current unemployment
rate of 9.2 percent is below the EU average (9.5 percent) and
significantly lower than Spain's 18 percent. (Note:

LISBON 00000510 002 OF 004


Government spending to stimulate the stalled economy is
projected to bring the budget deficit back up to 6 percent of
GDP this year. Portugal's overall debt is expected to
increase to 75 percent of GDP from 66 percent in 2008. End
Note.)

Smaller Parties Struggling to be Relevant
-----------------------------------------
7. (SBU) Left Bloc Deputy Luis Fazenda, currently running for
re-election, stressed to poloff September 17 that his party
defends workers' rights and employment. Criticizing the
Socialists' efforts on social security reform, he said the
Left Bloc seeks to increase social security benefits as well
as the minimum wage and unemployment benefits. He observed
that the "country is tired of the current absolute majority
because the government is arrogant in the name of liberal
reforms." He claimed that Socialist reforms have adversely
impacted society. The PS' social reform has reduced social
security benefits, while its labor reform has reduced
workers' salaries, and its health reform has resulted in
patients having to pay more for health care, according to
Fazenda. Currently with 8 seats in the 230-seat Parliament,
his party hopes to increase its presence.

8. (SBU) During a September 18 meeting with poloff, Social
Democratic Center/Popular Party (CDS/PP) Vice President Luis
Queiro, who served 10 years in the European Parliament until
June 2009, described the CDS/PP as a conservative party
supported by Christian Democrats. In contrast, he
characterized the PSD (which had observer status at both the
U.S. Republican and Democratic conventions in 2008) as a
"centrist party with elements of the right and the left." He
lamented that the CDS/PP has been unfairly stigmatized by a
perceived connection with the old right-wing dictatorship and
that no one in Portugal wants to be identified with the
right. He observed that to be labeled a fascist is "the
biggest political insult in Portugal."

9. (SBU) According to Queiro, the CDS/PP is focused on
justice, security, and unemployment. It favors the "Giuliani
model" of justice with quick sanctions to deter urban crime,
and tax reductions to give more money to families rather than
to the State. Like the PSD, the CDS/PP seeks to reduce
budget deficits and to cut public spending. On foreign
policy, Queiro observed that there is CDS/PP consensus with
the PS and the PSD. The CDS/PP supports the EU and the
trans-Atlantic relationship. It also values Portugal's
relations with Africa and Brazil, and is interested in
Latin-American policies. He said the CDS/PP, which currently
has 12 seats in the Parliament, hoped to exert greater
influence in the next government by gaining 2-4 additional
seats as predicted by polls.

Politics as Usual
-----------------
10. (U) The campaign season has been dominated by front-page
scandals, rumors, and negative campaigning (e.g., a
vote-buying scheme allegedly involving Lisbon PSD candidates
who are also under investigation for fraud and corruption in
a separate case; a wiretapping scandal implicating the PS
government; and a media scandal allegedly involving the PS)
that have tarnished the images of both major parties and
distracted voters from substantive issues. This year's
elections, as in the past, will be personality-driven.

Latest Opinion Polls Show Socialists in Lead
--------------------------------------------
11. (U) With less than a week until the elections, the
Socialists are maintaining their lead, with a three-point
margin over the Social Democrats. According to the latest
poll conducted September 12-15 by private Portuguese
marketing research company InterCampus, the Socialists have
33 percent of the intended vote, followed by the Social
Democrats (30 percent), the Left Bloc (12 percent), the
Communist Party (9 percent), and the Popular Party (7
percent). Eleven percent of those polled do not plan to
vote. A survey conducted September 11-14 by private
Lisbon-based Catholic University Center of Surveys and
Opinion Studies (CESOP) shows a six-point spread among
decided voters, the Socialists with 38 percent of the
intended vote and the Social Democrats with 32 percent, and
undecided voters at 24 percent (with a margin of error of 2.7
percent).

12. (U) According to political analysts, the televised
September 12 debate between Socrates and Ferreira Leite and
the start of the electoral campaign contributed to a small
one-point gain for the Socialists and a slight three-point
loss for the Social Democrats since a previous opinion poll

LISBON 00000510 003 OF 004


conducted September 4-8. The latest CESOP poll indicates
that a significant portion of the electorate -- 24 percent of
those intending to vote -- is still undecided. Regardless of
their intention of vote, 52 percent of those polled believed
the Socialists would win the most votes, compared to just 25
percent who speculated that the Social Democrats would pull
ahead. Most voters (78 percent) predicted that the winning
party would not obtain a clear majority. Less than half of
those polled believed the new government, regardless of the
party in power, would complete its mandate.

Possible Post-Electoral Scenarios
---------------------------------
13. (U) Possible post-electoral scenarios include a PS or PSD
minority government, or a coalition government comprised of
one of the two main parties and one or two of the smaller
parties. According to the latest opinion poll, in the case
of a Socialist victory without an absolute majority, most PS
supporters would prefer a minority government, while 22
percent would prefer a coalition with the Left Bloc. Very
few (10 percent of PS supporters polled) would support a
coalition with the PSD. Among Left Bloc supporters, 47
percent would support a coalition with the Socialists to form
a majority government. In the event of a PSD victory without
a clear majority, the option most preferred by voters was a
coalition with the conservative CDS/PP.

14. (SBU) PSD's Arnaut told poloff that the PSD would never
form a coalition with the Socialists, but would be open to
forming one with other parties, especially the CDS/PP. He
noted, however, that it was too early to speculate on this,
as he did not anticipate any problem with the PSD forming a
minority government. Left Bloc's Fazenda stated that his
party would never form a coalition with the PSD because the
PSD is too far right. Likewise, he said it would not likely
form a coalition with Socrates, noting that the Socialist
Party had moved too far to the right over the past 20 years.

15. (SBU) PS' Lello maintained that if the Socialists do not
win a clear majority, they could form a minority government,
with parliamentary agreements with other parties on a
case-by-case basis to enact legislation. He noted that, due
to significant ideological differences, it would be
impossible to form a coalition with the Leftist Bloc. He
pointed out, for example, that while the PS strives to
balance the public account, the leftists want to raise
salaries without regard to the effect on the budget.

16. (SBU) CDS/PP's Queiro predicts that the incumbent PS will
win a plurality but not a majority, in which case the CDS/PP
may consider forming a coalition with the PSD. He believed
it would be the only realistic coalition possible in Portugal
at this time, but added that it would not be impossible for a
minority government to rule. He predicted that the 2010
budget would pass (as it requires only a simple majority)
with the abstention of other parties. He also predicted that
a minority government would last at least until the next
presidential elections in early 2011 since the president
cannot dissolve the Parliament within the first six months
after elections or within the last six months of his term.
The earliest that new elections could take place would be in
mid-2011. The stability of the new government will depend
largely on the results of the presidential elections, he
concluded.

OSCE to Assess Elections
------------------------
17. (SBU) An OSCE election assessment team, comprised of
three two-member teams of legal experts, is in Portugal to
assess the September 27 elections in seven electoral
districts and in the autonomous regions of the Azores and
Madeira. During a September 18 meeting, Head of Mission
Jean-Pierre Kingsley told poloffs that a needs assessment
team visited in June at the invitation of the Portuguese
Mission to the OSCE to review the political and legal
framework for the elections. He explained that this
first-ever mission in Portugal was a response to Russia's
complaint that it was being held to a high electoral standard
while other countries had not been assessed. Kingsley, who
did not anticipate finding any significant problems, said
that the assessment team would not conduct a quantitative
assessment given its limited size and reach, but would focus
instead on best practices, including access by the disabled
to polling sites. The team will assess the extent to which
the national framework adheres to OSCE political commitments,
and will provide a post-election assessment with
recommendations.

Comment

LISBON 00000510 004 OF 004


-------
18. (SBU) With 24 percent of those polled still undecided,
the election is still up in the air between the ruling PS and
the opposition PSD, who won the European parliamentary
elections in June with 32 percent of the vote (compared to
the Socialists' 27 percent). Regardless of which party wins,
the next government may be unstable. PSD leader Ferreira
Leite has asserted that "governability" has never depended on
the composition of the government, whether majority or
minority; however, Portugal's political history indicates
otherwise. Only one minority government (1995-99) completed
its four-year mandate, and the PSD has ruled with a minority
government just once (1985-1987). Regardless of the outcome
of the elections, GOP cooperation with the U.S. and support
for the EU and NATO will likely continue unchanged.


For more reporting from Embassy Lisbon and information about Portugal,
please see our Intelink site:

http://www.intelink.sgov.gov/wiki/portal:port ugal
BALLARD

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