By Andrei Khalip
LISBON (Reuters) – The sudden resignation of Antonio Costa on Tuesday amid a corruption inquiry marked the end of his eight-year term as Prime Minister, a period during which Portugal, once considered the “sick man of Europe,” won over investors and EU allies with its fiscal stability.
Costa’s efforts to attract investments to Portugal following the country’s near bankruptcy and bailout in 2011 may have contributed to his downfall, as the corruption probe focused on alleged irregularities in the handling of lucrative, multi-billion-euro projects related to lithium mining and hydrogen production.
The 62-year-old Costa firmly denies any wrongdoing.
Although some of the projects and long-term government plans involving EU funds may now be at risk, analysts believe that most of Costa’s economic legacy will endure.
Carsten Brzeski, global head of macro at ING, predicts little impact on the financial markets from the crisis, citing the strong reputation Portugal has built with its economic policies in recent years.
Despite presiding over Portugal’s longest period of growth in decades and significantly reducing public debt, Costa was not highly popular at home due to his government’s frugal policies and involvement in various scandals with hand-picked officials.
Politically, Costa is recognized for his remarkable negotiation skills, which allowed him to form a post-election alliance in 2015 with far-left parties to oust the centre-right, a feat many analysts deemed impossible.
However, by his second term in 2019, support from the hard-left had waned, causing disagreements over social spending and deficit cuts, ultimately leading to the collapse of his government in late 2021.
Despite this setback, Costa’s party won an outright majority in the subsequent election, with German Chancellor Olaf Scholz praising Costa’s leadership as an example of democratic leadership.
Prior to becoming Prime Minister, Costa served as the mayor of Lisbon from 2007 to 2015, leveraging a burgeoning tourist industry to develop the city.
Costa’s association with former Prime Minister Jose Socrates, who was jailed in 2014 on corruption and tax evasion charges, has raised questions, but Costa has distanced himself from his former mentor.
While Costa achieved significant economic successes, such as the fastest pace of growth in 35 years in 2022 and a projected budget surplus for the following years, his departure under a cloud may overshadow his accomplishments.
Ultimately, Costa’s legacy may be defined by his role in rejuvenating Portugal’s economy, despite the controversies surrounding his tenure.
(Reporting by Andrei Khalip; additional reporting by Jesus Aguado; editing by Charlie Devereux and Nick Macfie)
