Portugal's Election Outcome Puts High-Speed Rail at Risk

An ambitious plan to link the capitals of Spain and Portugal by rail in less than three hours, which already has been postponed to 2013 from 2010, seems to be under threat again after the center-right's victory in Portuguese elections.

Pedro Passos Coelho, leader of the Social Democratic Party (PSD), which won the June 5 elections, focused his election campaign on austerity measures and has cast doubt on the rail project.

"The election result is bad news for the defenders of the project," said Luis Cabral of Madrid's IESE Business School.

"Whatever the result ... it was more or less envisaged that the project would be cancelled or at least suspended for some time," he said.

Portugal's austerity measures spring from the strict reform program Lisbon concluded with the European Union and the International Monetary Fund in exchange for a 78 billion euro loan.

In April, when Portugal sought the emergency aid to stabilize its strained public finances, the rail plan already was frozen.

But while the outgoing socialist Prime Minister Jose Socrates planned to relaunch it later, the PSD did not.

Although the loan granted to Portugal did not include a promise to suspend the Lisbon-Madrid rail link, Passos Coelho said last month he supported such a move, adding that the high-speed line "was not a priority."

On the Portuguese side, the project has a budget of 3.3 billion euros ($4.7 billion).

Derailed for Now

The Lisbon-Poceirao section of the line has been suspended, while work on the link between Poceirao and the border town of Caia, scheduled to start early 2011, has never gotten underway.

Spain has a budget of 3.8 billion euros. Work in Spain began in 2007 and is scheduled to finish in 2013.

The country has slashed its public works programs in austerity measures but is nevertheless pressing on with its high-speed-rail projects and now has the longest such network in Europe.

Rail Sparks Protests

Protests over the threat to the Lisbon-Madrid line have erupted in the rural impoverished western region of Extremadura, which has the most to gain from the link.

"To decide to suspend the project would be a strategic mistake that would definitely punish us, but for Portugal it would be an historic error to leave the country isolated from the connection not only with Spain but with all of the rest of Europe," said Dolores Pallero, vice president of the regional government.

"It is necessary to strengthen the commitment to launch and conclude the infrastructure projects decided by the two governments" for this line, which is of "vital importance" for the region, a regional business association, Creex, said in a statement.

Spain's ministry of public works would not comment on the affair as long as there is "nothing official" from Lisbon.

"In the short term, diplomatic pressure will not be very strong because the Spaniards will certainly understand the problem," as they themselves have a debt crisis, said Cabral.

Besides, "they are among the biggest creditors of Portugal" and therefore have an interest in seeing that Lisbon repays its debts before launching major works projects.

"But in a few years, when the debt problem is over, there will be a political problem" between the two neighbors if Portugal abandons the project, he said.