Portugal's Political Future: Snap Election Possibility

By Andrei Khalip and Sergio Goncalves

LISBON (Reuters) -Portugal is likely to face its third early parliamentary election in just over three years after the centre-right minority government lost a parliamentary confidence vote.

The government stays on in a caretaker capacity following Tuesday's vote, pending a decision by President Marcelo Rebelo de Sousa on whether to dissolve parliament and call a snap election amid concerns that a national ballot would only perpetuate political instability and mud-slinging.

WHY DID THE PRIME MINISTER CALL A CONFIDENCE VOTE?

Prime Minister Luis Montenegro presented the confidence motion last week after the opposition threatened to establish a parliamentary inquiry into Spinumviva, his family's data protection consultancy.

Opposition parties representing the majority of parliamentary seats had warned Montenegro they would reject the motion if it were presented.

Some analysts interpreted his move as a bluff, others saw intent to trigger an election while his ratings were still high and the economy on a strong footing.

The opposition says Spinumviva's contracts with private companies, including a casino and hotel business, have benefited Montenegro as premier.

Montenegro has denied any conflict of interest or ethical shortfalls, but the main opposition parties found his explanations unconvincing. There is no active investigation underway into Spinumviva.

He founded the company in 2021 but handed ownership to his wife and sons in 2022. Assets acquired after marriage belong to the couple under Portuguese law, leaving the transfer of ownership in a grey area between civil and commercial law. 

Just before Tuesday's vote, Montenegro proposed that he face a parliamentary committee inquiry that would last up to two months, but he said the main opposition Socialists refused to negotiate on setting a time limit, making the vote unavoidable.

Any lengthier investigation would have only served to wear out the government, Montenegro argued.

WHO WOULD WIN AN EARLY ELECTION?

Rebelo de Sousa has pointed to May 11 or 18 as possible election dates and is expected to decide on Thursday after meeting his advisory council.

Latest opinion polls show the main opposition Socialists taking a slight lead over the alliance led by Montenegro in the past week, but they are largely neck-and-neck at around 30% each, showing little change from last year's election, in which Montenegro won a four-year term by a slim margin.

The far-right Chega is steadily polling third, but somewhat below last year's result of 18%, which analysts attribute to scandals involving several senior party members.       

IS THERE ANY WAY OF AVOIDING AN EARLY ELECTION?

The president could ask the ruling coalition to come up with a replacement for Montenegro. But Montenegro's party has said he would lead it in any new election, so that option is all but ruled out, unless there is a last-minute reevaluation of the prime minister's chances of winning.

Political commentators put most of the blame for the crisis on Montenegro, and some polls indicate he may have lost the trust of most voters.

HOW ABOUT THE ECONOMY?

Despite the political upheaval of the past four years, Western Europe's poorest country - a member of the European Union and NATO - has shown stronger economic growth than most EU states, posting budget surpluses and reducing its debt under the centre-left and then centre-right governments.

Although it is struggling to contain a housing crisis, in part provoked by a tourism boom, strife has been rare.

A government change could stall big investment projects, including lithium mining in north Portugal, and the long-delayed privatisation of TAP airline, in which several key industry players have shown interest.

S&P Ratings, which upgraded Portugal to "A" from "A-" with a positive outlook just two weeks ago, said it did not expect a likely election to interfere with plans to further reduce government debt or to have a material effect on Portugal’s positive medium-term growth prospects.     

(Reporting by Andrei KhalipEditing by Gareth Jones)