May 20, 2024

(Bloomberg) — Portugal is holding early parliamentary elections on Sunday, offering a chance for a far-right party to raise its presence in parliament and upset the country’s two larger traditional centrist powers.

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The election follows the sudden resignation of Socialist Prime Minister Antonio Costa late last year. Now, under a new leader, the Socialists are trying to extend their eight years in power, while a center-right coalition led by the PSD, or Social Democratic Party, is pushing to return to government. The growing third force is Chega, or “Enough,” a far-right party founded in 2019.

Voting began at 8 a.m. and exit polls will be released at 8 p.m. in Lisbon. Voter turnout reached about 25% at noon in Lisbon, compared with 23% at the same time on the 2022 election day, according to government data.

Next month is the 50th anniversary of the Carnation Revolution, a military coup that ended more than four decades of dictatorship. Since the transition to democracy, the PSD and the Socialists have been dominant in politics.

If neither the Socialists or the center-right coalition win an absolute majority, Portugal could end up with a minority government reliant on the support of smaller parties, who may seek concessions in return for backing key measures such as the budget.

Campaign Issues

During the election campaign, the two main parties pushed policy pledges to attract voters frustrated with issues such as low wages, high taxes and a lack of affordable housing.

The Socialist program includes lower income taxes for the middle class and young people, and increasing the minimum wage. It also aims to keep cutting the debt ratio.

Portugal’s debt burden ballooned during the euro-area debt crisis, when the country needed a bailout. The debt ratio has since been on a downward trajectory, apart from the impact of the 2020 pandemic, and dropped below 100% last year for the first time since 2009.

The AD alliance wants to gradually reduce the corporate tax rate to 15% from 21%. It also plans to lower income taxes as well as taxes on house purchases for young people. Like the Socialists, it forecasts that debt will decline under its plans.

Chega, led by Andre Ventura, is hoping to make ground with voters weary of the two bigger parties, particularly in the wake of multiple corruption scandals. Costa resigned amid a probe into the possible illegal influencing of government officials in relation to planning for major projects.

Political Leaders

The right-of-center AD coalition is made up of the PSD and the smaller CDS-PP. Its leader, Luis Montenegro, 51, is a lawyer who’s headed PSD since July 2022. He was parliamentary party leader from 2011 to 2017, a period that included the years when his party was in government implementing the bailout program.

The Socialists’ new leader is 46-year-old Pedro Nuno Santos. An economist and former infrastructure and housing minister, he’s often linked to the left-most wing of the party. As secretary of state for parliamentary affairs from 2015 to 2019, Santos was the link between the minority Socialist government and the far-left parties backing it. That experience could be useful if the Socialists need support again after the March 10 election.

As the far right grows in influence across Europe, Ventura is pushing for his Chega party to join that trend. But his most likely ally, the center-right alliance, doesn’t appear interested in bringing him on board. Montenegro has so far ruled out a deal with Chega after the election.

(Updates to add voter turnout figures in third paragraph.)

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