Portugal's centre-right prepares to rule, far-right warns of instability

Portugal's centre-right Democratic Alliance (AD) won Sunday's general election by a slim margin and is preparing to govern without an outright majority as the far-right Chega party warned of instability if it is not included in government.

With 99.1% of the vote counted, the AD won 79 seats in the 230-seat legislature, followed by the Socialists with 76 seats, prompting the latter to concede defeat.

Chega, meaning "enough", came third, quadrupling its parliamentary representation to 48 lawmakers after campaigning on a clean governance and anti-immigration platform.

Chega voters said before the poll that Portugal was in a bad way and they wanted changes in housing, education, healthcare and justice in western Europe's poorest country.

AD leader Luis Montenegro told reporters on Sunday that he expected President Marcelo Rebelo de Sousa to formally invite him to form a government ahead of a March 15 deadline.

He said he hoped the PS and Chega would not form a negative alliance to prevent the government the Portuguese people wanted.

Chega's leader Andre Ventura told reporters the vote clearly showed that the country wants a government of the AD with Chega.

The outcome was broadly in line with pre-election opinion polls but the AD's victory was significantly smaller and Chega's growth was larger than predicted, political scientist Andre Azevedo Alves told Reuters.

Alves, a professor at Lisbon's Catolica University and St. Mary's University in London, added that the fragility of an AD government due to its reliance on either the PS or Chega to pass legislation made it unlikely to last for several years.

Chega's surge was boosted by widespread dissatisfaction with the mainstream parties and Ventura's communication skills, he said, factors that could help it garner even better results in the European Parliament elections.

Eurointelligence consultants said the result marked a new political chapter in Portugal after alternate governance by two mainstream parties for the past 50 years. The AD would need to either seek the backing of Chega or the Socialists for a minority government, or invite them into a coalition.

"We don't know who'll be in charge of the country, the far-right has little or nothing to offer," PhD student Jorge Catanheira, 29, told Reuters.

TILT RIGHT

The election result underscored a political tilt to the far right across Europe and a dwindling of Socialist governance.

Chega has since 2020 been part of the European Parliament's Identity & Democracy group, which is expected to see gains in European elections in June.

Spain's far-right VOX and Matteo Salvini, who leads Italy's co-ruling party Lega, congratulated Ventura.

Portugal's PSI stock index fell 0.3% at open, in line with a decline by European peers, before flattening out.

"The impact of the elections on the market turned out to be nil and we can assume that it was a 'non-event' for the markets," XTB market analysts said in a note.

"Even so, it's important to realise that the fact that the AD doesn't have a majority and needs to form coalitions with other parties in order to govern with a majority could be a risk factor if signs of instability start to appear again. In this scenario, we can't rule out a negative reaction from the Portuguese stock market," they added.

Under Socialist leadership since 2015, Portugal has grown at solid annual rates above 2%, except for the pandemic-induced slump of 2020. It has posted budget surpluses lately, using the cash to slash public debt below 100% of GDP.