Portugal is looking at months in limbo after a political scandal that’s left the country without a prime minister and raised questions about mining projects central to Europe’s green energy ambitions.
The corruption probe that’s rocked the nation of 10 million has already led to the resignation of Antonio Costa as premier this week. That’s left the Socialists, currently the country’s biggest party, in search of a leader before a snap election likely to take place early next year.
The political upheaval undermines the view of Portugal as a beacon of stability with a track record of fiscal responsibility after it needed a bailout during the euro-area debt crisis. That may hamper its ability to attract outside investment, something it’s pushed hard for in recent years.
At a conference in Lisbon on Thursday, the concern was clear, and some of the country’s top bankers said the country needs to move quickly to address the issues rather than let them linger and do further damage.
“What happened has direct impact and creates apprehension in relation to the country,” said Miguel Maya, the chief executive of Banco Comercial Portugues SA, Portugal’s biggest publicly traded bank. “We must be quick to respond to this, which is a particularly difficult time.”
The mood was already shifting after the government this year shut down its golden visa program and announced plans to end a scheme that offered lower tax rates to some people who moved to the country. Both decisions were touted as a response to a housing crisis that had sent prices soaring, particularly in Lisbon. But the decisions may also deter some workers, like the so-called digital nomads, that Portugal has been trying to lure.
Portugal’s tech aspirations also took a bruising recently because of controversy surrounding the Web Summit, an annual event in Lisbon that’s proudly backed by the government and is seen as Europe’s largest technology conference. It’s been in disarray after large companies and investors pulled out following comments made by the event’s founder in relation to Israel.
Read more: Runaway Property Costs Push Portugal to End Golden Era of Visas
One part of the corruption probe that erupted this week is focused on the granting of concessions for lithium projects in Barroso in the north of the country. According to Tuesday’s statement from the prosecutor, some suspects referred to interventions by Costa. It didn’t provide further details, citing the ongoing investigation.
Portugal has sought to stand out in its attempts to boost renewable energy production and reduce reliance on fossil fuels. The European Commission has classed lithium a critical material given its use in products such as electric vehicle batteries, and Portugal’s reserves are among the biggest in Europe.
London-based Savannah Resources Plc won environmental approval for a mine earlier this year after a long-running process to meet certain requirements, and announced its drilling program for the site last month.
Investigators visited Savannah locations as part of their work, it confirmed this week. The company, which describes itself as “enabling Europe’s energy transition,” said none of its employees are targets of the investigation and it has always acted lawfully.
Election Timing
The question for Portugal’s political parties is how all this affects voters. President Marcelo Rebelo de Sousa will host a gathering of his advisory council at 3 p.m. in Lisbon and is expected to set a date for a snap election after that meeting. The timing may also affect the approval of the 2024 budget, and plans to privatize state-owned airline TAP SA may be disrupted.
Costa had a rare majority in Parliament, and that’s unlikely to be repeated. According to the most recent poll, the opposition PSD was less than 4 percentage points behind the Socialists. The far-right Chega party, through smaller, is growing in support.
The Socialists still have no clear successor to Costa, though Finance Minister Fernando Medina and former Infrastructure Minister Pedro Nuno Santos have been seen as possible candidates.
“We have major challenges ahead,” said Joao Pedro Oliveira e Costa, CEO of lender Banco BPI SA, a unit of Spain’s CaixaBank SA, citing issues including housing. “This situation we are experiencing is not at all pleasant on several levels, not only because of the country’s reputation, but also because it creates a waiting period that the country does not need.”
