On March 12 of this year, Portugal appeared to live through its own version of the film Groundhog Day. Just over a year after António Costa abruptly resigned from the office of prime minister amid raids on his office over alleged corruption, his successor Luís Montenegro had also fallen in similar circumstances. Montenegro was found to have been receiving monthly payments from private companies, including a casino with a concession contract in need of renewal. The resulting collapse of the minority center-right government has forced the country to hold its third snap election in just four years on May 18.
These events are unprecedented, even considering Portugal’s turbulent history. They are a sign that the regime established just over 50 years ago, when the Carnation Revolution overthrew the dictatorship established by António Salazar, has now entered its own crisis.
Both the domestic and international press are treating the dizzying sequence of elections and corruption cases with surprising detachment. For the Financial Times and other economy-focused outlets, the main concern is with the “uncertainty” these developments bring to an otherwise positive economic scenario. Indeed, Portugal’s recovery from near bankruptcy in the wake of the 2008 crisis has often been cited as a successful example of neoliberal governance. The country is now one of the fastest-growing EU economies, its chronic budget deficit problem is no more, and countless other economic indicators seem to be excellent. For credit rating agencies and EU institutions, it is vital to maintain this narrative, both for international observers and the Portuguese electorate.
But the truth is that Portugal’s two mainstream parties—Costa’s center-left Socialists (PS) and Montenegro’s center-right Social-Democrats (PSD)—have dragged the country into a quiet political and economic catastrophe. This crisis is the result of compromising the country’s young democratic regime in the name of a European and neoliberal project.
The push to make Portugal more “Western” in the wake of decades of authoritarianism and isolation led the country to sleepwalk into the European Union. After joining the single market in 1986, the country underwent a period of drastic economic liberalization. Public companies were privatized, and the late industrialization achieved under the Salazar regime was reversed. The political class sacrificed the few successes the country achieved during torturous decades of dictatorship, as was demonstrated by economist Eric Baklanoff. All this to join Europe and a futile race for the “knowledge economy.”
There was indeed a brief period of growth in the 1980s, mostly driven by EU subsidies. Yet, what was left after it subsided wasn’t much to look at: a deindustrialised economy stapled to a much slimmer welfare state than the one that had been implemented following the Carnation Revolution, which had overthrown the dictatorship in 1974. The country’s recent history leaves clear the consequences of the path that the political class chose to follow.
The country’s much-propagandized current economic growth, for example, came after years of recession, the result of austerity imposed by Brussels in 2010. Those who celebrate Portugal’s recent economic success also fail to mention that in the first decade after it joined the Eurozone, it underwent a period of economic stagnation comparable to Japan’s “Lost Decade.” This means that the present rates of growth are merely making up for what was lost in the 2000s.
Nearly all of the recent economic growth stems from the expansion of the tourism sector and a subsequent real-estate boom. Portugal is fast becoming the European country where the sector makes the highest contribution to GDP. This insistence on tourism as a motor of the economy means that in the still-industrialized north, there are few signs of any boom—real or fake—as factory closures not dissimilar to Germany’s are shattering communities. Deindustrialization has left behind a trail of once-prosperous ghost towns such as Abrantes. Not far from Portugal’s capital is what remains of Lisnave, once one of the largest shipyards in Europe.
“Other supposed achievements are mere illusions.”
Other supposed achievements are mere illusions, or come with significant downsides. The drastic reduction of the public debt as a share of GDP—from 127.8 percent in 2013 to 95.3 percent today—was accomplished through brutal austerity. The European Central Bank did its part by gobbling up nearly half of all tradable Portuguese debt, leaving the country ever more captive to EU institutions. The elimination of public investment has forced governments to leave doors wide open to every kind of speculative foreign investment, the main catalyst for one of the worst housing crises in the world.
The few Portuguese who have prospered in recent years have not achieved their newfound wealth through wages. Most workers are now forced to go into low-paying and precarious service jobs, but the booming property market in the two main cities and some other well-located towns has turned a lucky few into near-millionaires overnight. Those who had never purchased a home were thrown into a different class. Most of their income goes towards paying high rent, as even distant suburbs aren’t affordable anymore. Hence, although income disparity has stayed relatively tolerable, social inequality has soared.
Making matters worse, the two establishment parties agreed on an open-border policy. In 2022, 118,000 migrants were recorded to have entered the country, although the real number is probably much higher. There’s now an immigration backlog of nearly 400,000 requests, and many social services are being pushed to their brink. Even more dramatically, the country has been shocked by exposés of gruesome cases of slave labor in plantations located in the southern regions. Desperate immigrants are lured under false promises of compensation, rounded up from big cities and brought in vans to work in the fields. Recent investigations have revealed the true cost of the revival of Portuguese agriculture.
Most Portuguese want to see tighter immigration restrictions and stronger labor protections.. But the barons of the agricultural and hospitality sectors have used their influence to lobby the political class to keep their preferred policies in place. Many politicians, including scandal-ridden Prime Minister Luís Montenegro, make their friendliness towards these interests no secret. These tragedies reveal the length to which employers will go to resist any improvement in the conditions of work and wages.
Immigration was the needle that broke the camel’s back for the Portuguese electorate, which came out in droves in 2024 to vote for the right-populist party Chega! (“Enough!”). Having won more than a million votes, and reaching 50 members in the country’s parliament, it was able to block the formation of a parliamentary majority. The party managed to attain a wide range of support throughout the country, making gains both in areas formerly dominated by the Communist Party mostly in the south, and in the conservative north.
Setting himself against the corrupt establishment, Chega’s André Ventura promises further crackdowns as well as the end of mass immigration. But his party has so far failed to become the threat to the establishment it purports to be. Although a skilled politician, Ventura seems unable to turn the party into more than a protest vehicle. Left-populist parties have previously disappointed and are now suffering the consequences, which should be a note of warning to Ventura. Chega recently missed an opportunity to stand up for Portuguese autonomy vis-a-vis EU encroachment, and lacked the bravery to present a realistic strategy on Ukraine during the last European elections. Ventura’s initial self-presentation as a Javier Milei-style small-government advocate also weighs on him, and gives little credence to his newfound devotion to pension and public-sector wage increases.
Controls on foreign investment, a drastic reduction in immigration numbers, and a strategy to revitalize the country’s industrial base are policies that could garner vast support. For Ventura, or any other upstart populist initiative, to reach power will require a clear break from the orthodoxies which have been strangling governance and the wider political discourse.
The Carnation Revolution celebrated its 50th anniversary last year, motivating much celebration along with reflection on how the country hasn’t lived up to the hopes of that moment. To understand where things have gone wrong, the political class and its populist challengers should look to Portugal’s economic path and its loss of autonomy for clues.