Portugal Forms Center-Right Government

Pedro Passos Coelho, Social Democrat leader and prime minister in waiting, was quoted in the report saying, "I will have important contacts today that have to be made to form the government, namely contacts with the CDS-PP. There are many difficult measures planned that will be taken. All the Portuguese will need a lot of courage, and I'm sure they'll have enough."

Paulo Portas, head of the right-wing CDS-PP, has already expressed his willingness to rule with the PSD. In the weekend election, the PSD won 105 seats and the CDS won 24. Between them, the two parties now command a clear majority within the 230-seat parliament; they also have a record of working together in coalitions. It is expected that this will allow them to slash spending and boost taxes substantially to address the countrys debt woes.

David Schnautz, debt strategist at Commerzbank in London, was quoted in the report saying, "The biggest risk, of a hung parliament is out of the way, so we should have a rather safe government, a coalition government. I'd say it is as good as it gets—there should be positive underlying impact from the election. The next thing to see will be, obviously, how quickly do we get some unpopular decisions, and how big is the backlash in society."