FILE PHOTO: A man looks at the newspaper's front pages the day after Prime Minister Antonio Costa announced his resignation due to the ongoing investigation on the alleged corruption in multi-billion dollar lithium, green hydrogen and data centre deals, in Lisbon, Portugal, November 8, 2023. REUTERS/Pedro Nunes/File Photo
LISBON (Reuters) - Portugal will hold a snap parliamentary election on March 10, its second in as many years, President Marcelo Rebelo de Sousa said on Thursday, following Tuesday's abrupt resignation of the Socialist prime minister amid a corruption investigation.
Yet, the president said he would only disband parliament, where the Socialist Party (PS) has a majority of seats, after the final vote on the 2024 budget bill, due on Nov. 29. The house approved the bill on first reading on Oct. 31.
Speaking after meeting his consultative body, the Council of State, on Thursday, and talking to the main political parties a day earlier, Rebelo de Sousa said allowing lawmakers to pass the budget will "allow to meet the expectations of many Portuguese" and deploy EU recovery funds in projects.
He said the government will remain in functions for now, but the election was needed to provide "clarity and direction to overcome an unexpected void that surprised and disturbed the Portuguese".
The budget includes lower income tax rates for the middle class, social benefits focused on the poorest and a 24% jump in public investment to spur slowing economic growth.
By law, an election needs to be held within 60 days of the publishing of the presidential decree dissolving parliament.
Antonio Costa stepped down as prime minister on Tuesday after prosecutors detained his chief of staff and named one of his top ministers as a formal suspect in an investigation into alleged illegalities in his government's handling of lithium and hydrogen projects, as well as a large-scale data centre.
Prosecutors said Costa was also the target of a related probe. He has denied wrongdoing.
Some of those detained in the investigation appeared before a Lisbon court on Thursday. They were suspected of crimes of corruption and influence-peddling, prosecutors said.
"I hope that time, sooner rather than later, will allow us to clarify what happened," Rebelo de Sousa said.
Costa expressed disappointment about Rebelo de Sousa's decision, saying that instead of calling the election the president could have accepted his party's proposal to name Bank of Portugal governor and former Socialist finance minister Mario Centeno as the new premier.
"The president understood that it was better to hold an election than having a stable, renewed government under the leadership of Mario Centeno," Costa said. "The country did not deserve to go to the polls."
'TRUST AND PRESTIGE'
Since coming to power in 2015 in the aftermath of a debt crisis and international bailout, Costa has presided over a period of strong economic growth during which his successive governments quashed the budget deficit and reduced the debt burden, winning praise in Europe for sound fiscal policies.
S&P Global Ratings said on Wednesday that his demise "does not pose immediate risks to the country's creditworthiness" and saw only modest risks to next year's public finances.
Filipe Garcia, head of Informacao de Mercados Financeiros consultants, said there was "certain consensus among the parties that are expected to form a government", be it the centre-left PS or the centre-right Social Democrats (PSD), on maintaining conservative budgetary policies and reducing public debt.
At home, Costa's government has been criticised for failing to do enough to tackle the cost-of-living crisis, which has made it harder for people in one of Western Europe's poorest nations to make ends meet.
Housing prices, fuelled by incentives to lure wealthy foreigners to the country, have soared since 2015 and more than 50% of workers earned less than 1,000 euros ($1,066.30) per month last year, according to government data.
By calling the March election, Rebelo de Sousa also addressed the need of the PS to pick a new leader to run. Earlier, PS President Carlos Cesar said March would be the best timing, while other parties pointed to January or February.
Main opposition party PSD could be a beneficiary of the election but there are doubts whether it could win a full majority or even build enough support to form a stable government.
Andre Ventura, the populist leader of the far-right, anti-establishment Chega - the third-largest force in parliament - could become a kingmaker for the PSD if it fails to clinch a majority, but Montenegro has so far ruled out any such alliance.
"It is urgent to reestablish trust and prestige in democratic institutions," the leader of the PSD, Luis Montenegro, said after the president announced the election. "We will face (the election) with a lot of ambition."
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(Reporting by Catarina Demony, Sergio Goncalves and Andrei Khalip; Editing by Marguerita Choy and Alistair Bell)
