After a corruption scandal surrounding European funds led President Marcelo Rebelo de Sousa to dissolve the parliament, Portugal finds itself once again at the polls, just two years after it last held snap elections that also came from a parliamentary dissolution. However, contrary to the 2022 elections, where the Socialist Party (PS) snagged the absolute majority, this time around the centre-right Democratic Alliance (AD) emerged victorious. But this victory by the slightest of margins leaves many domestic questions unanswered, all the while raising new ones for the EU.

What has led to these premature elections?

The Socialist Party, led by Prime Minister António Costa, had won an absolute majority in the previous 2022 legislative elections. However, Costa’s government became unstable due to multiple scandals and controversies, which led to a series of resignations in the government.

The straw that broke the camel’s back, however, came in November 2023 when the public’s prosecution office began an investigation against Costa, including searches of his office and private residence, in a case concerning his alleged involvement in the awarding of lithium and hydrogen contracts in projects as part of the Important Projects of Common European Interest (IPCEI).

Considering the severe charges, Costa took little time to hand in his resignation, but insisted on his innocence. While it is still unclear if Costa was involved in any sort of corruption president Marcelo Rebelo de Sousa accepted his resignation and dissolved the parliament. Only two years after the last snap-elections Portugal has now taken to the polls again.

In a complicated result the far-right is the biggest winner

The election night was a nail-biter. For a while, a draw seemed a real possibility, until the Democratic Alliance (AD) – a political alliance between the Social Democratic Party, the People’s Party and the People’s Monarchist Party – ultimately separated themselves from the Socialist Party (PS) by less than 1% of votes. 29,5% of votes were enough for a relative majority for the AD.

However, the election night was marked by the voters punishing the PS, which lost its absolute majority and crashed from 41,7% to only 29%. The general swing to the right was underscored by a commanding performance of the far-right Party Chega (which translates to “enough”), which achieved 18% of votes and cannot be ignored in coalition negotiations.

The election outcome is hazy as are projections for how a new government will form and fare. Here some implications for the major actors who will impact the legislative term:

Pedro Nuno Santos vows to lead the opposition

The secretary-general of the PS had the unenviable task of leading the socialists to a victory after a series of blunders within the party had led to the collapse of the government that resulted in yesterday’s snap elections. Against this background even departing prime minister Antonio Costa stated that no one could fairly expect a repetition of recent victories from Santos. Still, the aspiring politician will now have to overcome his name being linked to defeat after losing the absolute majority.

In his post-election speech Santos acknowledged the AD’s win and vowed to lead the opposition in the coming term, even with the seats from the international votes count still up for grabs until 20th of March. The four pending seats from the international count could technically still sway the majority for the PS. However, Santos has realized that the right-wing parties would incapacitate a PS-led government.

A repetition of the unpopular “contraption” model – an alliance with the extreme-left – seems also off the cards for him. In the upcoming term Santos will now likely focus on regaining the trust of the thousands of PS voters who left in frustration.

An uncomfortable victory for Luís Montenegro and his Democratic Alliance

While Montenegro has achieved his goal of superseding the PS government, his narrow victory will hardly be sufficient to form a stable government. Montenegro can expect no support from PS and the other left-wing parties for passing his budget and most of his legislation.

This will put his “no means no” to a coalition with far-right Chega to the test. If he stays true to his word, the AD will have to form a minority government. History in Portugal shows that to be a recipe for instability. Without any sort of political agreement another snap election would loom before the end of the current term.

This is a no-go scenario for Montenegro who could expect to be punished by voters in that case. This puts Chega in a promising position. It will certainly be tempting for Montenegro to find a form of agreement with Chega if that means a stable government and becoming the country’s prime minister.

André Ventura’s far-right Chega is the biggest winner

The timing of Chega’s triumphant success is symbolic. A bit over a month before Portugal celebrates 50 Years of revolution against the right-wing dictatorship, the country sees a return of fascist and antidemocratic rhetoric and a far-right powerhouse to the grand political arena – from an EU-perspective, this means the fall of one of its last strongholds against the far-right. Chega quadrupled its seats in the national assembly compared to the 2022 elections and stands now with 48 seats at just over 18% of votes, making it the third strongest party by a large stretch.

The traditionally two-party system has now become a three-party one. That is an undeniable victory for Ventura, who – salivating with success in his post-election speech – called for the right to unite against the left, claiming his part in a potential government with AD. Ventura knows that some in the AD are willing to engage in a coalition and has stated that should Montenegro stand firm, pressure could mount to replace him as AD’s leader for someone willing to form a coalition with Chega. Ventura has set his sights on even higher goals for the future and the pace of his success over the last two years could prove him right.

What are the challenges for the new government?

It will take time until the dust settles after a complicated result that left mostly everyone unsatisfied except for Ventura’s Chega. Come March 20th with the final counting of international votes, president Marcelo Rebelo de Sousa will invite Montenegro to form a government.

Even if his own party has won, the uncertainty surrounding the elections spells trouble the president, who fears that he will have to dissolve the parliament once again prematurely after having done so in 2021. An outlook that he surely would like to avoid.

When a new government finally stands, the challenges it will face are large and will not contribute to political stability. Portugal is currently facing the worst housing crisis in the EU with spiraling rents outgrowing salary growth by far. The various measures following the Euro crisis designed to lure in foreign capital – such as large-scale tax benefits for foreign investors and the so-called “golden visas”- have fired up the real estate market to an unsustainable degree.

While Portugal has one of the lowest medium income per capita rates in the EU, housing prices in Lisbon already exceed those of cities like Madrid, Berlin, or Milan. The country is also currently experiencing the highest housing price to income ratio in the OECD (figure 1).

housing prices

Additionally, Portugal is in dire need of a comprehensive reform of the national health and education sector, while at the same time having to accelerate its economic transformation as the country continues to display the by-far lowest productivity per worker in the western EU with 28% under the Euro Area average.

A weakening of the European left

The rise of the Portuguese right casts a shadow over the upcoming European elections, as Chega’s momentum threatens to contribute to the expected shift to the right in the upcoming European elections in June, where Ventura will aspire to set another exclamation mark.

What is more, the imminent succession of Antonio Costa by a likely centre-right politician has further far-reaching implications for the Socialist & Democrats in the EU who lose a prominent leader in their ranks. Costa was a key figure in the European left and his resignation has not only burdened his party in Portugal, but also put a dent in the European Socialists & Democrats (S&D) ambition of claiming major positions in Brussels.

The incumbent prime minister is a popular figure in Brussels among both the left and the conservatives and was a long-standing mediator across the EU’s political spectrum. Under him, Portugal developed into the “model student” of the European south, displaying an economically successful period where the country was able to significantly reduce its debt levels, while also boasting one of the strongest recoveries after COVID and the recent energy crisis.

In Brussels it was considered a certainty that Costa was destined to take up an important position in the EU, with the position of President of the European Council being his most likely landing spot given his popularity across the board. Ironically, it was a corruption scandal related to EU funding programs that led to his downfall.

About the author

Lucas Resende Carvalho is a Project Manager at the Bertelsmann Stiftung in the Europe’s Future Program.