Portuguese Prime Minister Antonio Costa resigned on 7 November, shocking the generally placid politics of the European Union member state after his cabinet became embroiled in a broad corruption investigation. The 62-year-old leader who has led the country’s Socialist party since 2015, maintained his innocence and alleged that “in these circumstances, obviously, I have presented my resignation to the president of the republic” in a nationally televised speech.

He made the announcement following his meeting with President Marcelo Rebelo de Sousa who accepted the resignation. The development transpired hours after police apprehended his chief of staff Vitor Escaria during raids on many governmental buildings and other locations as part of the inquiry into corruption in his administration’s handling of lithium mining and hydrogen projects.

Antonio Costa insisted that he had a clear conscience but he would not run for the prime ministerial position for the fourth time. He remarked, “The dignity of the functions of prime minister is not compatible with any suspicion about his integrity, his good conduct and even less with the suspicion of the practice of any criminal act.”

The president is going to have to decide whether to dismiss parliament and hold fresh elections or to allow the former premier’s party which holds a majority in parliament to form a new government. Carlos Cesar, the president of the Socialists, declared that his party was ready for “any scenario” while Luis Montenegro, the head of the main opposition Social Democrats proclaimed that he was ready for an early election and stressed, “The degradation of the government necessitates that no more time is wasted.” 

In a statement, the president revealed that he would address the country on 9 November following the Council of State meeting and that he would be meeting with representatives of the political parties represented in the Portuguese parliament on 8 November and another meeting of his advisory board, the Council of State, on the next day.

According to the state prosecutor’s office, the Supreme Court is conducting an inquiry into how individuals allegedly carried out illegal activity while using the prime minister’s name and involvement. It stated that the head of the environmental agency Nuno Lacasta and Joao Galamba, the minister of infrastructure were already arrested after being identified as perpetrators.

The former PM expressed gratitude towards his for their support and shed a few tears. “I totally trust the justice system. I want to say, eye to eye to the Portuguese, that no illicit or even reprehensible act weighs on my conscience,” and pointed out that he did not exist “above the law.” It was alleged that the culprits used his name and authority to “unblock procedures” related to the deals.

The prosecutor’s office issued a press release on 7 November saying that Vitor Escaria, the mayor of Sines and three other people had arrest warrants issued by an investigative judge because they posed a risk of flight and to safeguard evidence. The judge is looking at accusations of wrongdoing, government corruption and influence peddling in relation to concessions for lithium mines close to Portugal’s northern border with Spain as well as proposals for a green hydrogen plant and data centre in Sines, on the south coast.

The Sines Town Council, the Ministry of Infrastructure and the Ministry of the Environment along with private residences and workplaces were among the locations searched by the authorities. The European Union is pushing and significantly funding the continent’s green drive which includes Portugal’s lithium mines and green hydrogen projects. Antonio Costa has been a significant supporter of the initiatives and a close associate of Pedro Sanchez, the acting prime minister of Spain.

After the Socialists won a resounding victory in the previous year’s elections, he appeared destined to hold onto power for a number of years in Portugal. However, in December 2022, a furore over a 500,000-euro ($533,000) compensation payout to a board member of the state-owned flag carrier TAP Air Portugal caused his infrastructure and housing minister to resign. Furthermore, the junior infrastructure minister also quit.

Since his party won the polls last year, several prominent elected officials have stepped down from their roles. He maintained he was unaware that he was being investigated by the police. He opined, “This is a phase of my life that comes to an end.” Later this month, parliament was scheduled to vote on the budget bill for 2024. There are concerns that the political unrest may affect both the passage of the budget and the start of the privatisation process of TAP, the national airline of Portugal.

Political analyst Adelino Maltez highlighted, “It is inevitable that there will be elections after the sudden death of the government.” Lisbon University’s Antonio Costa Pinto acknowledged that a sudden election was the most likely scenario, but he did not rule out another Socialist leader assuming power.

The highly observed yield differential between Portugal’s 10-year government bond and the benchmark German Bund for the eurozone increased to 69 basis points from 65 bps on 6 November while the country’s stocks experienced a roughly 3% decline.

Projects Probed

Vitor Escaria was among the five persons caught as part of the inquiry, per the prosecutor’s office which had disclosed that various government buildings and his offices had been examined. Additionally, it unveiled that Nuno Lacasta, the president of the environmental agency APA and Joao Galamba, the minister of infrastructure and former energy secretary were formal offenders and would appear before a judge.

Prosecutors are digging into claims of influence peddling and graft in the lithium exploration concessions of Barroso and Montalegre in northern Portugal, as well as a mega data centre investment and a hydrogen plant project in the port of Sines. They said that the Supreme Court would investigate Antonio Costa’s potential involvement in the agreements and that they had learned that the suspects had “unblocked procedures” connected to the deals by using his name and power.

Antonio Costa declared himself “fully available to cooperate” with law enforcement. The prosecutor’s office mentioned, “At stake may be facts capable of constituting crimes of malfeasance, active and passive corruption of politicians and influence peddling.”

Portugal has been viewed as crucial to Europe’s aspirations to control more of the battery value chain and reduce reliance on imports because of its estimated 60,000 metric tons of lithium reserves.

Savannah Resources (SAVS.L), a London-based company, and Lusorecursos, a local company received environmental approval earlier this year from APA to harvest battery-grade lithium in Montalegre and to construct their own mine in Barroso. According to a statement from Savannah Resources, the company and its employees were not the focus of the inquiry, but it was assisting the police who paid visits to certain of its facilities. It further stated that work at the Barroso Lithium Project proceeded unhindered.

Locals and environmentalists have been very opposed to lithium developments. Portuguese anti-mining groups issued a unified statement demanding the “immediate cancellation” of all lithium projects and cited the recent events as evidence that mining procedures had not been executed transparently.