Moody’s warns snap elections could cause political deadlock

 In EU Bazooka, News, Ratings agencies

The ratings agency Moody’s has warned that snap elections could be inconclusive which would result in a political deadlock that would be “a bad thing for credit”. The deadlock would also bring uncertainties for the EU bazooka.

In a note sent to clients, the US agency states that the vote-down on the State Budget 2022 would “very probably” lead to snap elections and points out that polls show a inconclusive result that will make stable governance difficult.
“This uncertainty is negative for Portuguese credit and a political deadlock could prevent the Government from carrying out the necessary measures so that EU NextGeneration funds can be released”, states Moody’s, adding that the ‘bazooka’ funds “are crucial for Portugal’s economic growth.”
The Moody’s note recalled that since 2015 Portugal’s budgets have been passed “by a parliamentary arrangement know as a ‘geringonça’ (jalopy) and that this is the first time since 1974 that the budget has not been passed by the Portuguese Parliament.
Moody’s points out that the budget that was thrown out “was not particularly austere” since it foresaw a minimum salary rise, expenditure on health, pensions and public sector pay. It also points out that the disagreement between the Government and the left-wing parties in parliament ( Communist PCP/Left Bloc) is not really down to the budget, but rather the Portuguese Prime Minister António Costa’s refusal to reverse some changes to Portugal’s labour laws. In the meantime, a General Election is most likely to be called by the President of the Republic, Marcelo Rebelo de Sousa for 16 January 2022.