Antonio Costa’s Getting Hotter as Achieves Portugal Recovery

  • António Costa has won the latest Portuguese legislative elections by absolute majority.
  • During these last years, especially during António’s Costa rule, Portugal has experienced a pre pandemic economic boost and thus, gained a reputation.
  • As a result, António Costa is trying to drive Portugal towards a new diplomatic outlook and economic plan.
António Costa
Arne Müseler Wikimedia (CC BY-SA 3.0 DE)

Why is António’s Costa heat level Hot?

Answer: he had a harsh start to his duties as Prime Minister forming a wide coalition, but over time, Costa has turned challenges onto great opportunities.

Portuguese Prime minister António Costa’s political “honeymoon” is at its peak. The social democrat former Lisbon mayor (2007-2015) ]had a hard beginning to power. He managed to form what seemed almost an utopian alliance (“gerigonça”) with their historical bitter rivals, the Communists. Right now several issues are heating Costa’s temperature. 

The Prime Minister has been admired on multiple fronts for his achievements in office, the first one being his victory in the recent Portuguese legislative elections in January 2022. In October 2021, the minority center-left government led by Costa was unable to pass the 2022 State Budget. As a result, Portuguese President, Marcelo Rebelo de Sousa dissolved the Parliament and called for a snap legislative election. António Costa’s political party surprisingly won the elections with 41,68% of the votes and an absolute majority of 117 seats out of 230, retaining the position as the largest party and not depending on the Portuguese Communist Party (PCP), the Left Bloc and the Green party coalition. 

Before this, Portugal was part of the PIIGS (Portugal, Italy, Ireland, Greece, and Spain). The PIIGS was a group of countries, hence they were hit hard by the 2008 global financial crisis. The economic troubles of Portugal, Italy, Ireland, Greece, and Spain reignited debate about the efficacy of the single currency and the Eurozone. Therefore, to cast out all these doubts, EU leaders proposed a peer review system for approval of national spending budgets and each country pursued austerity policies.

For Portugal, the Passos Coelho government pursued austerity policies with great vigor. Austerity policies included tax increases and cutting spending, leading to job losses that led to a negative GDP growth and 15% unemployment. So, in 2015, António Costa formed a new minority government with left wing groups (“gerigonça”).

Despite the fragility of this new coalition, the Portuguese economy started to recover (“Sardine Capitalism”). In 2016 Portugal halved its fiscal deficit to 2.1% of GDP, the best result since the instauration to democracy in 2014. At the same time, the Portuguese economy grew for three years in a row and there was a return of wages and pensions to their pre-crisis level. The Portuguese Central Bank estimates that by 2019 unemployment will fall to 7%.

Costa’s main goal has been reshaping Portuguese foreing policy and Portugal regaining international clout, especially coming back from its maritime links. A clear example has been Portuguese National Ocean Strategy 2013-2020. This Strategy was published in 2013, a year before Costa’s arrival to power. However, he has followed and taken further steps to implement it. Since 2009, Portugal has engaged in a legal initiative with the UN, under article 76 of the UN Convention on the Law of the Sea. Portugal claims to extend its sovereignty over the continental shelf beyond the 200 nautical miles of its Exclusive Economic Zone within the archipelagos of the Azores and Madeira.

Another example of the prime minister’s success in the international arena was in January, 2017. On this date, Antònio Guterres took over as secretary general of the United Nations. Additionally, since Brexit, Portugal has managed to keep a balance between the European Union with the protection of its ties with the UK. During the ongoing war in Ukraine, Portugal has provided military equipment to Ukraine and it will contribute between €8-10 million to the European Peace Facility. 

Equally important in understanding Costa’s hot temperature is the leader’s efficient approach and progress with regards to the Portuguese vaccination programme. Portugal used to be in its worst phase of the pandemic, it was among the hardest-hit countries with its public hospitals near collapse. Nevertheless, Costa’s goal is to vaccinate 85 percent of the population against SARS-CoV-2 in nine months. On February 28th, 2022 Portugal was the second most vaccinated country worldwide with 92,5% of its population fully vaccinated, right after the UAE.

Who is changing António’s Costa temperature?

Answer: Gerigonça, SARS-Cov-2 pandemic and the latest legislative elections are keeping Costa’s temperature high. 

Despite what appeared as a complicated start to his term, Prime Minister António Costa is not by any term without challenges and pragmatic solutions. There are in fact, numerous factors that do reinforce Costa, each of them as potentially beneficial as the last.

The most pronounced of these was without doubt the forming of his first mandate, which was commonly known as “gerigonça”. In 2015, Prime Minister Antonio Costa, of the center-left Socialist Party (PS) managed to form a criticized coalition with three bitter PS enemies and  extreme left-wing politics: the Portuguese Communist Party (PCP), the Left Bloc and the Green party. Analysts believed that the leftist coalition would get the country into trouble, since Costa promised to “turn the page on austerity”.

In the political sphere, Paulo Portas, former Popular Party (CDS by its acronyms), a conservative party, made a tough speech against Antonio Costa and stated that the coalition was not “a government, but a geringonça” (which in Portuguese means something that is poorly made, with a fragile structure and precarious functioning).

Against all odds and political disparities, Costa’s ability and pragmatism have managed to keep this coalition from 2015 until 2021. At the same time, Portugal has achieved what amounts to squaring the circle: lowering the fiscal deficit while raising wages and pensions for employees and retirees. For instance, in 2016 Portugal halved its fiscal deficit to 2.1% of Gross Domestic Product (GDP), the best result since the transition to democracy in 1974 and the economy has been growing for three years in a row.

Prime Minister Costa also faced economic hardship during the ongoing SARS-CoV-2 pandemic. The Portuguese government called for isolation and eventual lockdown in 2020 resulting in lower infection and mortality rates than many of its European neighbors. At the same time, Portugal earmarked €200 million in loans to support SMEs, the launch of a credit line to support treasury to companies affected by the outbreak and including a special budget to allow people who are out of a job to get training, as well as the employees covered by layoffs, among other policies.

The true challenge came in February 2021, Portugal had the highest COVID-19 infection and death rates in the world. Despite this harshness, the Portuguese government appointed  Vice Admiral Henrique Gouveia e Melo, in charge of the SARS-CoV-2 vaccination plan. Thanks to Henrique’s Gouveia e Melo leadership and the non interference of the Portuguese government, Costa’s goal to vaccinate 85 percent of the population against COVID-19 in nine months was achieved.

Costa has equally faced pushback from the political instability led by the “gerigonça”. In October 2021, Costa’s cabinet presented the 2022 Portuguese State Budget Proposal, but Costa political allies, on October 27th voted down his budget, triggering snap elections. However, Costa managed to leverage public opinion and anger towards his former far-left partners who dumped him by blocking the government’s 2022 budget bill and thus, Costa managed to secure an absolute majority in parliament.

António Costa’s position in these situations had not had any bad political consequences that gave the leader’s opposition party ample ammunition in the near future.

What is driving António Costa?

Answer: The wish to meet great expectations and be able to widen his electorate, while strengthening Portugal’s economy and image, and his own position.

There are several factors behind Prime Minister Costa’s policies, not only to maintain his approval ratings and gain further political clout but also to address Portugal’s socioeconomic issues and create and secure opportunities for the nation’s near future.

Costa’s primary concern was to change Portugal’s economic policy and he first aimed to do so by making an impossible alliance called “gerigonça”. Antonio Costa’s government went against the traditional recipe and IFM recommended policies. For instance, his government increased the minimum wage and implemented a 35-hour workweek for public employees. Under his mandate, in 2019, Portugal recorded its first budget surplus, equivalent to 0.1% of Portuguese GDP, since 1974. 

In 2020, SARS-CoV-2 pandemic hit the Portuguese economy hard, e.g, Portugal’s GDP (Gross Domestic Product) fell by 7.6% in 2020. In 2020 the unemployment rate in Portugal reached 6.8% and youth unemployment closed at 22.6% by the end of 2020. In February 2021, Portugal had the highest COVID-19 infection and death rates in the world, but in a quick and pragmatic policy, in October 2021, more than 80% of the Portuguese population was fully vaccinated. At the same time, at the economic level, the António Costa government presented in October 2021, the 2022 Portuguese State Budget Proposal. Within this proposal, there were some tax relief measures, such as: a partial Personal Income Tax exemption for the youngsters. 

After the 2022 Legislative Parliamentary Elections, Costa managed to consolidate a more stable government and to stop being dependent on the “gerigoça” coalition. António Costa’s main goal will be unlocking the new tranches of the EU pandemic recovery funds, through the implementation of a lower budget gap. 

The aim to strengthen the Portuguese economy and position have been at the forefront of Costa’s policy-making decisions, not only in the domestic policy but equally for social democrats in Europe. One of Prime Minister António Costa received in Lisbon Cape Verde prime minister, where cultural ties were at the top of their agendas.

Ultimately, Prime Minister Costa’s decisions in tax reform, vaccination post economic policies, strengthening of fiscal balances, and foreign policy have everything to do with meeting the electorate’s great expectations of Costa’s government. While the leader’s austerity policies and fiscal reforms have been approved by the population, Costa is motivated primarily by the strengthening and stability of his government and Portugal as a whole, while keeping favor with key constituents.

What does it mean for you?

Answer: Costa’s response to challenges could have far reaching ideological pragmatism, proving a potential model for social democrats in Europe.

As the first politician in Europe to win elections by absolute majority in Europe after the SARS-CoV-2 pandemic in 2020, António Costa broke and took advantage of a bitter historical rivalry between the Social Democrats and the Communist party in the country and managed from 2022 snap elections to guarantee stability, meaning the effectiveness of this government and how it will use the EU funds for the post SARS-CoV-2 economy.

The electoral success of António Costa can be largely attributed to his pragmatism. This pragmatism has been translated as a pledge to work in dialogue with all other Portuguese political parties, apart from Chega to pull the country out of the pandemic, and thus, implement investment and key reforms to boost Portugal’s economic recovery.  In October 2022, far left parties (Portuguese Communist Party (PCP), the Left Bloc and the Green) dumped Costa budget and precipitated the early elections to win political clout and support.  Nevertheless, Costa managed to materialize this voter anger into his favor.

While Costa is identified as a Social Democrat, contrary to other European countries, the Portuguese Socialist Party did not originate from labor or union movements, but he has provided and conducted “business friendly” policies. It is clear that his policy-making decisions and pragmatism have been different from former goverments’ approach. Depending on Costa’s next moves, we could witness a rise in popularity of fiscally oriented and business friendly policies. Portuguese economic policies could be an example for other center-left movements around Europe, specially in Southern European states.

António Costa may seem a quiet candidate, but he pulled off a stunning victory in Portuguese Legislative Elections, securing an absolute majority in parliament and thus, consolidating governmental stability. His first priority will be passing a new budget for 2022 to begin using €45bn in EU Covid recovery funds, but Costa’s temperature stabilizes and his good graces widen, it seems something has changed for the Portuguese with their government and politics.