The Portuguese government backed down from the proposed measure to increase employee's social security contributions and decrease employers' contributions. A measure that manages to elicit the opposition of the Portuguese left-wing parties, the unions, employers' associations, the American Enterprise Institute, and the Wall Street Journal is certainly unusual. Let me speculate a bit - and let me stress speculate - on causes and consequences.
1. Part of it was probably just a series of mistakes, either unforced or, most likely, forced by the context of the Troika evaluation, inter-coalition relations, and government coordination problems. The measure was announced without any background studies legitimating it or documents explaining it in detail, leading the media to engage for days in wild and contradictory guesses about its consequences (the only study of the impact of this specific measure I know of was made by a group of economists of Minho and Coimbra). The government even failed to ensure that, in the immediate aftermath of the announcement, at least a few voices would come in its defense, either from within the PSD or (especially) from the coalition party, the CDS-PP. Instead, what it got was a barrage of criticism not only from the opposition but also from notable figures of the PSD and from its coalition partner. It is difficult to recall a single respected political figure, scholar, or expert that came in the measure's defense. In reaction to this, the government kept introducing nuances to the measure that seemed to be made up as it went along. From the political marketing/communication point of view, the whole thing was abysmally managed. Voters may have difficulties in understanding the implications of these sorts of measures beyond the very evident fact that their paycheck will be smaller, but they have no difficulty in looking around for cues from reliable sources in order to form their opinions. And so they did: a week later, 78% of respondents in a public opinion poll disagreed with the notion that the reduction of
companies' social security contributions would help fighting
unemployment, while 81% disagreed with the notion this would have an
impact on consumer prices. Game over.
2. There was probably also some amount of hubris involved. It may be the case that some people in the government or in the group of government advisers are persuaded that the 2011 election and the PSD's victory meant some sort of vindication of a "liberal," "market-friendly," or "business-friendly" agenda. If that's the case, I'm afraid they are likely to be sorely mistaken. The data from the 2011 post-election study shows that voters' positions in these issues have remain unchanged since at least the early 2000s, and that such positions were furthermore completely irrelevant in their vote choices. This means that the PS's effort to turn the election into an ideological "fight for the survival of the welfare state" was a failure, but also that the election did not mean in any way a legitimation of the PSD's ideological agenda either. Furthermore, anyone who has ever looked at surveys measuring Portuguese voters' views about social inequality and work relations would easily guess that any measure that could be construed as "shifting money from workers to employers" would have close to zero chances of eliciting any sort of relevant support.
3. We should not forget that the government's problems did not start in September 7th. The government had a horrible summer, most notably a media barrage against minister Miguel Relvas and his alleged ethical and legal problems. Then, the plan for privatization of public television - led precisely by Relvas - managed to mobilize an influential sector of opinion - cultural and media agents - that are not exactly known for their love of the Right. A lot of badly needed political capital was wasted on these side issues.
4. There's also an element of the government's discourse since the very beginning that is probably counterproductive. The vaguely populist message entailed in the "smallest government ever" thing and on the emphasis on "fighting waste" and "trimming the fat" in the state apparatus, together with regular and ill-advised promises that economic recovery is coming "next year", probably did not help making voters quite prepared for real magnitude of the problems faced, for the failures in meeting the deficit targets, and for the many additional austerity measures that will be necessary in order to meet them. Correct management of expectations is much more important that giving false "glimmers of hope" or pretending that "trimming fat" is what this whole thing is about. We're in this for the long haul, and everybody hates realizing they may have been deceived.
5. The future holds dangers. I leave the economic dimension to my colleagues here, but it seems clear that the marriage between the PSD and and CDS-PP is becoming more and more a marriage of convenience, plagued by mutual distrust. Minister Relvas has been mortally wounded for a few months now, but it is unclear who is supposed to perform his political coordination role when (we're way past the "if" question) he ends up being replaced. It is also a bit of a mystery how Mota Soares, the CDS-PP social security minister, who supported the TSU measure only to face his own party's leader disagreement a few days later, finds it appropriate to remain in the cabinet. Some of these problems can be solved with a cabinet reshuffle after the approval of the 2013 budget, but the legacy of mistrust between the parties and the way the "governability" image of Portugal was tarnished will be difficult to reverse.
6. But not all is bad news. There's no obvious alternative political solution to the current coalition. Most voters seem to agree with that. The somewhat unpopular President, Cavaco Silva, played nonetheless a crucial role in defusing the crisis brought about by the TSU measure. The fact that the government was able and willing to back down from the TSU measure is a very positive sign. Demonstrations have been large and reveal anger and disappointment, but they have been peaceful, and so have the relations with police forces. The Minister of Finance's comments about the demonstrations, praising their moderation and dignity, were impeccable. The contrast with Spain, not to mention Greece, is quite instructive. Robert Fishman, a political sociologist, has a wonderful article in which, among other things, he shows stark and unexpected contrasts between Portugal and Spain in what concerns the relationship between protesters and institutional power holders and the role and acceptance of mass mobilization in Portugal. The recent events are a nice confirmation of Robert's ideas.