Portugal President Set to Call Snap Vote Amid Infrastructure Scandal

(Bloomberg) -- Portugal’s president is set to call a snap election after the country was thrown into a political crisis following the resignation of Prime Minister Antonio Costa earlier this week.

President Marcelo Rebelo de Sousa is expected to set a date for the vote – likely in early 2024, based on the time frame for the previous such election just last year.

The ballot is part of the messy fallout from the turmoil that unfolded at breakneck pace on Tuesday. News broke in the morning that police raided government offices and detained Costa’s chief of staff as part of an investigation into allegations of government corruption. The prime minister’s resignation followed hours later. 

Prosecutors in Portugal have several probes ongoing, some of which involve government officials, and local media have reported about investigations related to lithium and hydrogen projects since at least 2020. But Tuesday’s police raid in the prime minister’s office complex was unprecedented and marked a dramatic escalation. 

Costa said he was “surprised” to be the target of a criminal process, and after saying that his conscience was clear and offering to fully cooperate with authorities, the 62-year-old turned emotional, thanking his wife “for the many personal sacrifices” she has made.

The probe that plunged Portugal into crisis is related to lithium exploration concessions in northern Portugal, hydrogen production, and a data center project developed by a company called Start Campus. According to Tuesday’s statement from the prosecutor, some suspects referred to interventions by Costa. It didn’t provide further details, citing the ongoing investigation.

Five Detained

About 145 police officers raided locations including the environment ministry and the infrastructure ministry to seize documents and other evidence. Five people were detained: Vitor Escaria, the premier’s chief of staff; the mayor of Sines, the location of the hydrogen and data center projects; two directors at Start Campus; and a lawyer hired by that firm.

Prosecutors also listed Infrastructure Minister Joao Galamba as an “arguido,” a status similar to a person of interest.

With the Socialist government in chaos, the country of 10 million people is now set for a snap election that may create more uncertainty. Costa had a rare majority in Parliament, and that’s unlikely to be repeated, forcing parties to try to form a minority government or seek partners in a coalition.

Depending on when the president decides to dissolve parliament, the 2024 budget may or may not get the final approval it still needs from lawmakers. And a plan to privatize state-owned airline TAP SA may also be disrupted.

The Socialists have no clear successor to Costa, who’s been prime minister since 2015. He was reelected in 2022 in an early election called after parliament rejected his budget. But he subsequently secured an absolute majority, which meant he no longer needed to bargain with far-left parties.

In that election, the far-right Chega party grew to 12 seats in parliament from one, becoming the third-biggest force. Opinion polls indicate support has since increased further. 

It’s not clear how the scandal – one of a number to mar Costa’s tenure – will affect voters. In a poll late last month, Costa’s Socialists were leading with almost 29% support, while the center-right PSD was just 3.7 percentage points behind.

While the economy has been recovering following the Covid-19 pandemic, average wages remain low in Portugal,  and the PSD party has made that an issue. It’s pointed out that the country has been overtaken in terms of gross domestic product per capita by eastern European nations that joined the European Union later, including the Czech Republic and Slovenia.

Costa has made it clear he won’t run again in a general election: “It’s a stage of my life that is finished.”