Portugal and the fourth way

Antonio Costa with Spanish Prime Minister, Pedro Sanchez - Credit Galería fotográfica / Ministry of the Presidency. Government of Spain via Wikimedia Commons

Patrick Costello on the defeat of the socialists after a relative success story

Portugal’s 10 March elections dealt a heavy blow to the hopes of the European left. It wasn’t just that the Socialists and their allies lost so heavily, after an unprecedentedly successful eight years in power. These elections also marked an ominous breakthrough of the far right Chega party which jumped from one seat in 2019 to 50 out of 230, the third biggest party.

For the pro-European left, Portugal’s last decade of government had been a model. The Socialists took power in 2015, led by the popular former Mayor of Lisbon, Antonio Costa, a man proud of his Indian (Goan) heritage. Costa improvised a confidence and supply deal with the Left Bloc, the Greens and the Communists to overturn a minority right wing government just weeks after it had been formed. The main condition for their support for the new government was a reversal of the austerity policies that were being prescribed by both the European Union and international creditors. In Costa’s first term, he kept his promises to restore civil servant salaries and reduce taxes on employees while increasing property taxes.

It is already hard to believe but at the time, the new reflationary policies were being openly criticised and privately laughed at. The consensus view in Brussels was that Costa would have to come crawling back to the international lenders in a similar U-turn to that forced on Greece the year before. Portugal’s public debt was forecast to hit 130% of GDP that year and it was only a massive international bail out in 2011 that had saved the country from defaulting in exchange for a string of cuts to the State including the axing of 10% (73,000) of public sector jobs. How could little Portugal escape the relentless logic of the credit crunch and the global recession?

In fact it did more than escape, it boomed, which is perhaps why so little was written about the Portuguese example outside left wing circles. The country enjoyed its longest period of growth in decades while at the same time managing to reduce public debt (down to this year’s prediction of 97% of GDP). Unemployment rates plummeted and within two years the government even managed to reverse the high rates of Portuguese emigration. More Portuguese were now returning to the country than leaving it. The country was also almost unique in having no far-right political force emerging during the decade: Chega was only founded in 2018.

Politically, Costa reaped the benefits, winning more seats in 2019 and then an absolute majority in 2022. European socialists started to refer to the political model as the “fourth way”, suggesting it could become the new model for socialists across the continent. Costa himself was being quietly talked about late last year as a shoe-in to replace Charles Michel as the President of the European Council.

So what happened in March? The immediate cause was a corruption probe into concessions for green investment projects. In November, two people close to Costa were arrested and within hours, he resigned as Prime Minister, triggering an early election. Ironically no charges were brought against Costa, and the investigation unraveled after the prosecutors admitted they had confused the name of the Prime Minister with that of his economy minister in transcribing wiretaps. But an election fought on the grounds of perceived Socialist corruption was never going to go well for the left.

Looking deeper, the agreement between the socialists, left bloc, communists and greens was always a tricky one to manage. Costa’s socialists dropped their partners as soon as they had the parliamentary numbers to do so and ran a minority government in 2019 and then a majority one from 2022. There was little or no tradition of the different strands of the left cooperating in Portugal making it remarkable that they achieved it in 2015. However, perhaps it was precisely the pressure to balance the different political strands within the parliamentary majority that made the policies so good, with the Socialists focused on ensuring that government finances were stable enough to avoid another bail out while the others were holding him to the fire in delivering the promised reversal to austerity and privatisation. The less the Socialists needed their partners the greater the focus became balancing the budget rather than improving living standards. The country was then hit very hard by COVID 19 given the importance of tourism to the economy, creating new economic hardship, the perfect conditions for the siren songs of the far right to win over a substantial section of the electorate.

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