Portugal’s Socialists Pick Santos as Leader Before Snap Election

Joao Lima
Sat, December 16, 2023 



(Bloomberg) -- Portugal’s ruling Socialists picked former minister Pedro Nuno Santos to be the new party leader ahead of a snap election in March that was called after his predecessor unexpectedly quit as premier.

Santos won party elections held on Friday and Saturday, Socialist official Pedro do Carmo told reporters in Lisbon late on Saturday. The 46-year-old beat current Home Affairs Minister Jose Luis Carneiro, 52, who presented himself as being more moderate than Santos.

“I’m not radical or moderate, I’m Socialist,” Santos told supporters in Lisbon.

The new Socialist leader has been seen for years as a successor to Antonio Costa, who resigned on Nov. 7 amid a probe into possible influence peddling in government. President Marcelo Rebelo de Sousa then called an early election for March 10. Costa, who’s been prime minister since 2015, had won reelection in January 2022 with an absolute majority in parliament that the Socialists are unlikely to repeat in March.

Santos, an economist who’s been known for speaking his mind, is often linked to the leftmost wing of the party. He’s been a defender of the state’s role in controlling certain businesses, including the country’s carrier.

Santos resigned as infrastructure and housing minister at the end of 2022 following criticism about the compensation paid earlier that year to a board member for leaving TAP SA, the state-owned airline that received more than €2 billion ($2.2 billion) of government aid.

Since then, he became a political commentator for a television channel, a step that could help bolster his popularity.

As secretary of state for parliamentary affairs from 2015 to 2019, Santos was the link between the minority Socialist government and the far-left parties that ensured Costa had majority backing in parliament. That experience could be useful if the Socialists need support from other parties again after the March 10 snap election.

After getting his university degree, Santos started working in his family’s northern Portugal-based industrial equipment business, called Grupo Tecmacal SA. He also led the Socialist Youth from 2004 to 2008.

Opposition Leader

In the March election, Santos will face Luis Montenegro, 50, a lawyer who’s led center-right opposition party PSD since July 2022. He was parliamentary party leader from 2011 to 2017, a period that included the years when his party was in government implementing a bailout program.

Even as the Socialists have struggled with challenges including a surge in living costs, opinion polls published before Costa resigned suggested that Montenegro wasn’t able to make his party capitalize more on those problems and win supporters. The PSD party, which also pledges fiscal discipline, has called for deeper tax cuts than the Socialists plan for 2024.

The ruling Socialists led PSD by 4 percentage points in an opinion poll published by weekly newspaper Expresso on Dec. 8.

Read more: Portugal’s Outgoing Premier Apologizes for Cash in Aide’s Office

The challenge for the Socialist Party now will be to hold onto votes amid the ongoing investigation into possible influence peddling, and anger over housing and salaries. For the opposition parties, the focus will be on how to take advantage of those troubles.

While the economy has recovered from the Covid-19 pandemic, average wages remain low in Portugal, and the PSD party has made that an issue. It’s pointed out that the country has been overtaken in terms of gross domestic product per capita by eastern European nations that joined the European Union later, including the Czech Republic and Slovenia.

Whoever becomes prime minister after the March election will go into office with a budget already in place. The outgoing Socialist government’s 2024 budget includes income tax cuts and targets a surplus of 0.2% of gross domestic product, smaller than the surplus projected for 2023. The economy is slowing, and the Bank of Portugal on Friday cut its 2024 growth forecast.

A change in government may not necessarily lead to a major shift in budget policy. With the debt ratio above 100% of GDP, and the memory of the euro area debt crisis and Portugal’s bailout still relatively fresh, fiscal discipline will likely remain central to any administration.

Santos said he wants to continue reducing the country’s debt ratio. “My dream has always been to have a decent country, a country with less inequality,” he added.

The political upheaval in November didn’t have a big impact on Portugal’s bonds. The country’s 10-year bond yield was at 2.7% on Friday, compared to 3.2% six months ago. It peaked at 18% in 2012 at the height of the euro region’s debt crisis. And ten days after Costa resigned, Portugal’s government bond rating was raised two levels by Moody’s Investors Service.

The election won’t just be about the two main, historical centrist parties. When Costa was reelected in 2022, the far-right Chega party grew to 12 seats in parliament from one, becoming the third-biggest force. Opinion polls indicate support for that party has since increased further.