The Portuguese Political Crisis

Reading time: 4 mins approx.

António Costa, Prime Minister of Portugal, stood down on 7 November. The Socialist party leader’s resignation followed a corruption investigation by the Public Prosecutor’s Office, in which dozens of homes and government offices have been searched. Licences for lithium mining, hydrogen production and the creation of a large business database are under investigation.

It is a sign of a robust democracy that the prosecutor’s office is active and not controlled by government. Vitor Escaria, Costa’s chief of staff; and Diogo Lacerda Machado, a business broker, have been detained, while the infrastructure minister and four secretaries of state have been formally charged. It has been reported that Escaria had €75,800 in cash hidden in his office. Still, Portuguese justice is slow: though Prime Minister José Socrates (2005-2011) was accused of corruption, imprisoned in 2014, and later released his case remains without definitive conclusion.

The President of the Republic, Marcelo Rebelo de Sousa, accepted Costa’s resignation and called for a snap election to be held on 10 March 2024 – over two years early. Despite Costa’s stepping down, the current Parliament will not be dissolved until 15 January 2024; allowing time for a final vote to approve the state budget, due on 29 November, and for the Socialist party to select a new leader ahead of the election. At present, Costa remains caretaker prime minister.

Costa was Mayor of Lisbon from 2007 to 2015, and prime minister since 2015. His first minority government, supported by two left-wing parties, restored some of the cuts to pensions and public sector salaries imposed in 2011-2014, when an insolvent Portugal was bailed out by the International Monetary Fund and European financial stabilisation bodies.

The most successful policy under Costa’s watch has been investment in renewable energy, which generated 67% of the country’s needs in October this year. The country is on track to reach 80% renewable energy production by 2030. Portugal’s Recovery and Resilience Programme with the European Commission, focused on resilience, climate and digital transformation projects and set to total €22.2B of investment by 2026, had reached 17% implementation by August this year.

The reduction of public debt following the 2011 bailout has seen a significant drive, too. In this respect, Costa has had some success: from a high of more than 130% of GDP in 2012-2016, and again in 2020 due to the impact of COVID-19, debt has fallen to a projected 106% for 2023. The budget deficit was 0.4% in 2022, and a surplus is forecast for 2023 for the first time in 35 years. However, the reduction in the public deficit has come partly at the cost of a reduction in investment.

The Portuguese economy has experienced stagnation and weak growth since 2000, but recovery following Covid-induced GDP decline in 2020 is robust: 5.5% in 2021 and 6.7% in 2022. Attracting foreign investment has been the government’s main objective in recent years, but old practices of direct involvement still often prevail. It seems the traditional patrimonial and clientelist Portuguese state has not been uprooted. To move forward, the transparency of such procedures must be guaranteed.

The open social environment created by Costa's first government, contrasting the bailout years, evaporated. The effects of the so-called Golden Visa, encouraging real estate acquisition by foreign nationals, and unregulated expansion of short-term rental services like Airbnb, have displaced working and lower-middle-class residents from the central areas of major cities. A resulting housing crisis is contributing to new social tensions and the declining living standards of part of Portugal’s population, along with diminishing performance of the national health service and public education system.

An erosion of support for Portugal’s other left-wing parties brought a new majority for the Socialist Party in January 2022’s legislative election. Yet Costa’s second government was, surprisingly, weaker than his first: rocked by a series of small corruption cases and internal conflicts, two ministers and five secretaries of state resigned.

Voting intentions for March 2024 may fluctuate depending on the new, as-yet-undetermined leadership of the Socialist party. In January 2022, the Socialist Party won 41% of the vote, while the centre-right Social Democratic Party (PSD) garnered 28%. By October this year, already seeing diminishing polling performances prior to Costa’s resignation, the Socialists’ share had fallen to around 28%. After the Prime Minister's resignation, a poll showed the the Socialist Party on 18%, PSD ahead on 22%, and the far-right Chega! (Enough!) on 13%, up from 7% in the last election. The two parties to the left of the Socialists would together get 11%, with the Communists at their lowest level ever at 3%.

With four months still to go until the snap election, it is very early to make predictions; but it will be difficult for the Socialists to recover from this scandal, which has followed misguided urban policies and a very limited reformist drive.

Francisco Bethencourt

Francisco is a leading historian of the Portuguese-speaking world; he also contributes to Global History. He is the author of Racisms: From the Crusades to the Twentieth Century (Princeton, 2013) and The Inquisition: a Global History, 1478-1834 (Cambridge, 2009). His first monograph on the history of magic and witchcraft was published in Portugal and Brazil.

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