LISBON (Reuters) – Portugal’s upcoming election is expected to be inconclusive, according to opinion polls, with the possibility of the far right playing a significant role in coalition talks. This comes as the country prepares to mark 50 years since the downfall of a fascist regime.
WHY THE EARLY ELECTION?
The election, scheduled two years earlier than planned, was triggered by the resignation of Socialist Prime Minister Antonio Costa in November. Costa stepped down after being implicated in a corruption investigation related to government handling of major investment projects worth billions of euros.
Costa, along with his chief of staff, faced scrutiny over the allegations but was never charged with any wrongdoing. The case eventually crumbled, with a judge accepting a charge of influence peddling against the accused, but not corruption. Critics of the prosecutor’s office accused it of political meddling without solid evidence.
In the previous election in January 2022, Costa’s Socialists secured an outright majority with over 41% of the vote. However, the government’s credibility took a hit, causing their popularity to drop below 30% in recent polls, trailing behind their center-right rivals, the Democratic Alliance (AD).
POSSIBLE SCENARIOS
The AD, led by the main opposition Social Democratic Party (PSD) and including two smaller conservative parties, currently leads in most polls, albeit closely followed by the Socialists. However, neither party is projected to secure the necessary majority of at least 116 seats in the 230-seat parliament.
Nevertheless, poll results should be interpreted cautiously, as no pollster accurately predicted the Socialist majority in 2022. The prevailing trend indicates that only a collective right-wing bloc, involving the far-right Chega party, could potentially form a viable government.
There remains a significant portion of undecided voters, around 20%, which leaves room for various outcomes.
* PSD leader Luis Montenegro has stated that if his alliance emerges on top, he would establish a minority government, possibly with support from the business-friendly center-right Liberal Initiative (IL). He has ruled out any collaboration with Chega.
* A combined total of 116 seats between the AD and IL could form a stable government, whether as a formal coalition or through IL’s parliamentary backing.
* Alternatively, a center-right administration may rely on Chega’s parliamentary votes to pass legislation. The first crucial test would come when the 2025 budget is up for approval by the end of the year.
Chega leader Andre Ventura, advocating for controversial policies such as the death penalty and strict immigration controls, has expressed his intentions to have a say in the government in exchange for support. He placed the responsibility for any disruption on Montenegro for refusing negotiations.
* If the Socialists secure the most votes but the right-wing bloc attains a majority, the Socialists would have the initial opportunity to form a government. Montenegro has stated he will not pursue the prime ministership in this scenario but has not clarified if he would support a Socialist-led government.
Chega has threatened to submit a motion to block such a government, necessitating the support of the moderate right. Nonetheless, this setup could be prone to collapse in the near future.
* A less likely outcome is the combined left gaining the majority. Socialist leader Pedro Nuno Santos has indicated a willingness to form a parliamentary alliance with the far left, as previously done between 2015-2019. While this arrangement could offer stability, it might pressure the Socialists to deviate from fiscal caution and increase social spending, potentially unsettling investors.
WHAT IS PORTUGAL’S ECONOMIC SITUATION?
Under Socialist governance since late 2015, Portugal has enjoyed steady annual economic growth exceeding 2%, except for the pandemic-induced downturn in 2020. The country has recently recorded budget surpluses, reducing public debt below 100% of GDP, earning praise from Brussels and investors.
However, the government’s austerity measures have sparked public dissatisfaction. Regardless of the election outcome, investors anticipate a continuation of fiscal prudence and economic growth. The incoming government is likely to face challenges related to social unrest, including escalating housing prices and demands for higher wages from various sectors like law enforcement, education, and healthcare.
(Additional reporting by Sergio Goncalves; Editing by Frances Kerry)
