Portugal’s parliament is set to topple PM Luis Montenegro's govt in confidence vote

Portugal’s parliament is set to topple Prime Minister Luis Montenegro’s center-right minority government in a confidence vote on Tuesday, likely leading to the country’s third early election in just over three years.

The confidence vote, due to take place after a debate that starts at 3 p.m. in Lisbon, comes amid speculation surrounding potential conflicts of interest related to a company owned by Montenegro’s family. He called the vote to clarify if his minority government has “all the conditions” to carry out its program.

Montenegro’s administration, which took office less than a year ago, doesn’t currently have enough support to win the confidence vote, meaning it will likely fall and face early elections in May. A snap election could delay government decisions, including a plan to privatize state-owned airline TAP SA this year and investments in infrastructure such as high-speed railway links.

If the government loses the confidence vote, elections could take place on May 11 or May 18 at the earliest, President Marcelo Rebelo de Sousa said on Wednesday. While the president is mainly a figurehead, he has the authority to appoint the premier, dissolve parliament and decide whether to call early elections.

Socialist leader Pedro Nuno Santos has reaffirmed that his party, the biggest opposition group in parliament, will vote against the government. Previously, the Socialists let the minority administration’s 2025 budget pass by abstaining in a vote in November, and they’ve also helped Montenegro defeat censure motions. Montenegro has had to compromise on key policies such as corporate tax cuts to get backing.

Chega leader Andre Ventura has also said his far-right party, the third-biggest group in parliament, won’t give Montenegro a vote of confidence.

Montenegro, 52, has led the PSD party since 2022 and says he will seek reelection as premier. It will likely be a close race against Socialist leader Santos. A poll published by TVI on Sunday showed the ruling AD coalition leading with 34% support, followed by the opposition Socialists with 29% and Chega with 14%.

Portuguese bonds fell on Tuesday, in line with the broader euro area government bond market. The yield on 10-year notes rose two basis points to 3.38%, compared to a four basis point increase in comparable German debt. Over the past week, Portugal’s debt has underperformed most peers amid the political uncertainty. Portugal’s PSI benchmark stock index rose 0.4% as of 9:12 a.m. in Lisbon.

Portugal’s last early election was held in March 2024, four months after it was called, and Montenegro took office in April. The premier’s AD coalition got a narrow win over the Socialists in that early election. Far-right party Chega grabbed much of the spotlight in that vote, when it quadrupled its number of seats in parliament.

Montenegro succeeded Antonio Costa, a Socialist who unexpectedly quit as prime minister in November 2023 after eight years in office amid a probe into alleged influence peddling. Costa, who denies wrongdoing, is now European Council president.

Minority governments in Portugal have tended to be short-lived — in 50 years of democracy, only two have survived a full four-year term. The Socialists and Montenegro’s center-right PSD party, which is the senior partner in the governing AD coalition, have dominated Portuguese politics in those five decades.

Fiscal discipline has been a focus for successive administrations since the euro-area debt crisis, when Portugal needed a bailout. While in 2023 the debt ratio dropped below 100% of gross domestic product for the first time since 2009, it’s still at a high level and the memory of the debt crisis and Portugal’s bailout is relatively fresh. S&P Global Ratings on Feb. 28 upgraded Portugal’s government bond rating to A from A-, citing deleveraging.

The government aims to post a budget surplus of 0.3% of GDP this year as economic growth accelerates. The Bank of Portugal in December raised its 2025 growth forecast to 2.2%.

Questions about a family-owned firm and potential conflicts of interest have been adding pressure on Prime Minister Montenegro since February. Montenegro said on Feb 21 that he set up the family-owned company, called Spinumviva, when he wasn’t active in politics and that it’s absurd to consider that owning a stake in the firm generates a conflict of interest.

He’s said he never took any decision that involved a conflict of interest. The company is now totally owned by the premier’s children, he announced earlier in March.

Solverde, a Portuguese operator of casinos and hotels, told newspaper Expresso that it’s paid Spinumviva €4,500 ($4,914) a month since July 2021 for services related to compliance and personal data protection.

The prime minister, who worked as a lawyer earlier in his career, has said he won’t take part in decisions involving companies that he has links to. For example, the government may have to take decisions about the Algarve and Espinho casino concessions, which end in 2025 and are currently held by Solverde.