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Portugal faces uncertainty after knife-edge election

Portugal looks set for a period of political uncertainty after no party won a majority in a general election at the weekend that has left the far-right in the role of potential kingmaker.

The centre-right Democratic Alliance (AD), which won the most seats in yesterday’s vote, is expected to be asked in the coming days to try to form a government.

AD beat the incumbent Socialist Party (PS), but took just 79 seats – far short of a majority in the 230-seat parliament.

Even with the backing of small business-friendly party Liberal Initiative (IL), the AD would still need the support of anti-immigration party Chega to reach a majority of 116 seats in the assembly.

Chega posted the biggest gains winning 48 seats, up from just 12 in the last election in 2022, cementing its position in Portugal’s political landscape.

The party has demanded to be part of a rightist coalition government in exchange for parliamentary support, but AD leader Luis Montenegro repeatedly ruled out any post-election agreement with Chega, described as xenophobic by its critics.

An AD minority government “could face significant obstacles to legislating over time and require support on a case-by-case basis,” said Javier Rouillet of ratings agency Morningstar DBRS.

“If the new government is unable to pass legislation, this could raise the prospect of another round of elections later this year or early next year,’ he added.

Passage of the 2025 budget will likely constitute “the first major test” for an AD-led minority government, Mr Rouillet said.

‘Challenge is great’ – AD leader

While Socialist leader Pedro Nuno Santos has said his party would refrain from bringing down a centre-right minority government he warned it would vote against its first budget.

“We will be the opposition, we will renovate the party and we will seek to win back the Portuguese who are dissatisfied with the PS,” he said after the results were issued.

The AD campaigned on promises to boost economic growth by slashing taxes which the Socialists had warned would require cuts to pensions and other social spending.

“We know the challenge is great. It is going demand a great sense of responsibility, a great capacity for dialogue,” Mr Montenegro said in his victory speech.

He will likely come under considerable pressure from his own party to reach some sort of agreement with Chega.

Some top AD officials such as former prime minister Pedro Passos Coelho have been more ambivalent about working with the party.

Chega leader Andre Ventura told reporters the vote “clearly showed that the Portuguese want a government of the AD with Chega”.

Earlier, he said that Mr Montenegro would be responsible for any political instability if he continued to refuse to negotiate.

Socialist leader Pedro Nuno Santos addresses supporters after conceding defeat

The election results mark another advance for the far right in Europe, where they already govern – often in coalition – in countries such as Italy, Hungary and Slovakia, or are steadily gaining, as in France and Germany.

Chega, which means “Enough”, calls for stricter controls over immigration, tougher measures to fight corruption and chemical castration for some sex offenders.

Just five-years-old, the party picked up its first seat in Portugal’s parliament in 2019.

It was the first far-right group to win representation in the assembly since a military coup in 1974 toppled a decades-long right-wing dictatorship.

There are four seats left to be assigned representing Portuguese who live abroad, but those results will not be known for days. They have traditionally gone mostly to the centre-right.

The election was called after Socialist Prime Minister Antonio Costa, 62, unexpectedly resigned in November following an influence-peddling investigation that involved a search of his official residence and the arrest of his chief of staff.

Though Mr Costa was not accused of any crime, he decided not to run again.

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