Portugal’s PSD and CDS agree on coalition – source

LISBON, June 14 (Reuters) – LISBON, June 14 (Reuters) – Portugal’s Social Democrats (PSD) have reached an agreement with the rightist CDS-PP party to form a majority coalition government, a source close to PSD leader and prime minister-in-waiting Pedro Passos Coelho said on Tuesday.

“The two parties will be ready for a public signing of the political agreement and the basis for a government programme later this week,” the source told Reuters. Passos Coelho met with President Anibal Cavaco Silva earlier on Tuesday.

The Social Democrats won the June 5 general election, obtaining 105 seats in a 230-seat parliament to defeat the ruling Socialists. Their traditional ally, the CDS-PP, won 24 seats.

Investors are eager for a new government so that it can quickly start to implement the terms of a 78-billion-euro bailout Portugal secured from the European Union and the International Monetary Fund last month. It includes tax hikes, spending cuts and structural reforms.

The source said the next steps to form a cabinet would only take place once the president has appointed the prime minister.

Under the Portuguese constitution, the president can appoint a prime minister only after he has met with all the political parties following the election.

Cavaco Silva was scheduled to meet the leaders of the Communists, the Left Bloc and the Green Party later on Tuesday, and to meet PSD, CDS-PP and Socialist delegations on Wednesday.

The president last week asked Passos Coelho to start the process of forming a government urgently in the hope that the new prime minister can take office in time for the European leaders’ summit that starts on June 23. (Reporting by Sergio Goncalves; writing by Shrikesh Laxmidas; Editing by Kevin Liffey)