Portugal without Costa: The former prime minister’s economic legacy is likely to continue


Written by Andrei Khalip

LISBON (Reuters) – António Costa’s shock resignation on Tuesday amid a corruption investigation brought an ignominious end to his eight-year premiership, during which he endeared Portugal, once seen as the sick man of Europe, to investors and EU counterparts who saw in it a Portugal. . A haven for financial stability.

His efforts to attract investment into Portugal after its near-bankruptcy and bailout in 2011 may have played a role in his downfall, as the investigation focused on alleged irregularities in his government’s handling of auspicious multi-billion-euro projects to extract lithium and produce hydrogen. .

Costa, 62, denies any wrongdoing.

Analysts say some of these projects and long-term government plans involving the use of EU funds may now be at risk, but most of Costa’s economic legacy is likely to endure.

Carsten Brzeski, global head of macroeconomics at ING, expected little financial market impact from the crisis thanks to the strong reputation the country has built for itself in recent years through its economic policies.

Although Portugal enjoyed its longest period of growth in decades and reduced public debt under Costa’s leadership, the socialist was not very popular at home due to the frugality of his successive governments and several scandals involving carefully selected officials.

Politically, many analysts credit Costa and his impressive negotiating skills with achieving the impossible when he reached a post-election coalition in parliament in 2015 with far-left parties to oust the center right.

Support for the hard left evaporated at the start of his second term in 2019, as his partners demanded more social spending and opposed deficit cuts, for which Costa and his finance ministers won praise in Brussels.

Achieving the impossible

But when his government collapsed in late 2021 as a result of Parliament’s rejection of the budget bill, Costa once again defied the odds as his party won an absolute majority.

German Chancellor Olaf Scholz said last April about Costa’s re-election: “He said that absolute majority is not synonymous with absolute power. What an example of democratic leadership.”

Before becoming prime minister, Costa was mayor of Lisbon from 2007 to 2015, taking advantage of the emerging tourism boom at the time to develop the capital.

He was seen as the right-hand man of former Prime Minister José Socrates, who was imprisoned in 2014 on charges of corruption and tax evasion, but he tried to distance himself from the former prime minister.

Costa’s father was Goan writer Orlando da Costa, a Communist Party militant, and his mother, María Antonia Bala, a journalist and women’s rights advocate.

Several politicians and analysts said Costa had become arrogant in his third term, which was reflected in his decision to retain Infrastructure Minister Joao Galamba despite pressure from the president and public opinion to sack him over disagreements over state-owned airline TAP in January 2023.

But Costa has had many successes, including the fastest pace of growth in 35 years in 2022 and an expected budget surplus for this year and next.

Costa may leave under a cloud, but in the end he may be remembered for reviving the moribund economy, said ING’s Brzeski.

“This ends a government that clearly led the economy into a few golden years and managed the transition from austerity to growth,” Brzeski said.

(Reporting by Andrei Khalip, Additional reporting by Jesus Aguado, Editing by Charlie Devereaux and Nick Macfie)

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