Socialist leader Mario Soares took office at the head of Portugal's new left-center government today facing an acute recession and threats from the pro-Soviet Communist Party to disrupt his program for recovery.
The previously untried coalition of Socialists and Social Democrats was sworn in by left-leaning President Antonio Ramalho Eanes at Lisbon's Ajuda Palace as Communist-led unions launched a series of strikes aimed at embarrassing the country's 15th government since the overthrow of a 48-year dictatorship in 1974.
Bus and subway workers paralyzed public transport in the capital while workers in state steel and shipping industries held work stoppages that coalition leaders condemned as part of a campaign to undermine plans for a broad social pact and the streamlining of the vast nationalized sector.
The Communists have pledged to boycott Soares' key policy of forging a "social contract" among workers, employers and government to contain wage and price rises. The Moscow-line party that unsuccessfully pressed for a role in the new government has accused Soares of betraying Socialist voters by forming what they claim to be a conservative coalition.
But Soares warned in a tough inaugural speech that close to a decade of political and social unrest such as the present strikes had brought Portugal to the brink of economic disaster.
"This government will be austere, uncompromising and unpopular if that is what it takes to secure recovery," the new prime minister said.
He went on to give an indictment of the state of the nation: "Portugal has been paralyzed for months; the economy is out of control; major companies, both state and private, are on the edge of collapse; capital is being illegally drained from the country; inflation currently at 24 percent is eroding our standard of life; corruption is a serious blight on the country . . . . In short, we are at a crossroads."
The economic crisis is marked by a $3 billion balance-of-payments deficit that has increased fourfold since 1979, a $13 billion foreign debt representing 60 percent of the gross national product and inefficient agricultural production that forces Portugal to import more than half its food.
To meet interest payments of $1.2 billion due this year, the outgoing government was forced last month to put up 10 percent of its gold reserves to secure two short-term loans from the Bank of International Settlements totaling $700 million. On Wednesday it signed a further $300 million loan from a consortium of international banks.
Soares made it clear in his speech that only drastic austerity measures could avert collapse. He outlined three parallel emergency programs: an 18-month priority plan to reduce foreign debt, a two-to-three-year policy of boosting production and business investment, and a four-year modernization program geared to entry into the European Community.
Economic sources said the new government may also approach the International Monetary Fund for a major loan and may introduce a 10 percent devaluation of the escudo, which already has fallen 60 percent against the dollar since 1981.
To tackle the crisis, Soares has the advantage of the biggest majority of any of Portugal's short-lived democratic governments. The Socialists won 101 seats in the April 25 elections and the Social Democrats won 75, giving their coalition more than two-thirds of the 250-seat National Assembly.
The Socialists have nine ministers in the new Cabinet, the Social Democrats seven, including the key ministries of labor and agriculture. Social Democratic leader Carlos Mota Pinto was sworn in as deputy prime minister and defense minister. Socialist Jaime Gama, 36, a close adviser to Soares, will be foreign minister. The only independent, former European Community ambassador Ernani Lopes, will take on the difficult role of finance minister.