Executive Summary

Leftist coalition forms unlikely government
The period under review covers the third year in office of the António Costa government. The Costa government entered office under inauspicious circumstances. Holding a minority of parliamentary seats, Costa’s social-democratic Socialist Party (PS) needed the support of two unlikely allies – the political forces to the PS’s left: the Left Bloc (Bloco de Esquerda, BE) and the Portuguese Communist Party (Partido Comunista Português, PCP) – to form a government.
rhetoric raised flags
The anti-austerity and, to some extent, anti-EU discourse of these allies suggested an inevitable clash with the government’s pledge to meet Portugal’s post-bailout European commitments – and market pressures – regarding budgetary consolidation.
Performance far
surpasses expectations
The seemingly precarious nature of this political solution led this coalition arrangement to be dubbed the “geringonça” (or the “contraption”). Yet, over the last three years, political practice has significantly belied initial expectations. The Costa government has managed to corral a mostly stable parliamentary majority with its left-wing allies, notably in terms of approving the State Budget, the key policy instrument for Portuguese governments. In addition, by bringing the hitherto excluded BE and PCP into government decision-making, the “contraption” has helped reduce overall political polarization, at least between the PS and the left – if not to the right.
Consolidation paired
with austerity rollback
At the same time, it has achieved an unprecedented record of budgetary consolidation, with the lowest two-year average (2016 and 2017) in terms of deficits since democratization, while alleviating (in discourse and, at least to some extent, in practice) the austerity agenda that had marked the 2011 – 2014 period.
Success story for post-bailout politics
These results have led to a greater international influence for Portugal, as the country has become a success story for post-bailout policies within the European Union. The “geringonça” continues to garner interest from around Europe as a way of reducing party polarization, very much against international trends. And, during the period under review, the country’s international recognition is reflected in the election of Minister of Finance Mário Centeno to the presidency of the Eurogroup in December 2017 – an outcome that would hardly have been conceivable without budgetary consolidation.
Outcome boosted by economic growth
These positive outcomes have been helped by economic growth, boosted by exports and tourism. Equally, unemployment rates have continued to fall, now standing at 6.6% – the lowest level since September 2002. The country has also become increasingly attractive to the tech sector, a fact exemplified by the country’s ability to host the Web Summit since 2016, with a deal in place to continue hosting the summit until 2028.
Governance capacities show greater gaps
The above elements would suggest an overwhelmingly positive assessment regarding Portugal’s governance. However, while some positive changes in Portugal have been evident during this review period, notably with regard to economic aspects in general and budgetary aspects more specifically, these coexist with persistently low scores in governance dimensions pertaining to policy formulation, implementation and oversight. The regulatory impact assessment (RIA) framework, strategic decision-making, monitoring of institutional arrangements and policy evaluations remain weak. As in the past, this weak capacity affects the quality and impact of new and existing policies.
Efforts to boost strategic capacity in early stages
The Costa government program has as a key plank the simplification and modernization of public administration, with a focus on improving the quality of governance. There have been some efforts to improve governance and strategic capacity (e.g., with steps to strengthen RIA), but these remain very much in their infancy. While the country did not, during the period under review, experience any catastrophic events (e.g., like the devastating and deadly forest fires of 2017), it remains to be seen whether the current government will be able to deliver reforms in governance – a domain in which so many previous governments have promised more than they have achieved.
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