Has Portugal's António Costa struck his last
deal?
A problem-solving prime minister faces his greatest
challenge ever: Clearing his name in time to become president of the European
Council.
By AITOR
HERNÁNDEZ-MORALES
in Lisbon
MARCH 7,
2024 4:00 AM CET
https://www.politico.eu/article/antonio-costa-portugal-election-2024-european-council-last-deal/
On a bright
sunny morning last November, the spectacular political career of Portuguese
Prime Minister António Costa came to an abrupt halt as police officers launched
a dramatic raid on his official residence in Lisbon’s Palacete de São Bento.
As
investigators began to comb through the elegant neoclassical mansion
overlooking the country’s parliament, authorities descended on ministries
throughout the capital, the private homes of several officials, and the
headquarters of the Portuguese Socialist Party.
Within
hours, both Costa’s Chief of Staff Vítor Escária and his personal adviser Diogo
Lacerda Machado were under arrest. Shortly thereafter, Minister of
Infrastructure João Galamba and the head of the country’s environment agency,
Nuno Lacasta, were indicted for suspected acts of corruption, embezzlement and
influence-peddling in connection to lithium mining and hydrogen-production
schemes, as well as the creation of a new state-of-the-art data center in
Sines.
If there
were initial doubts as to whether Costa had been caught up in the probe, by
mid-morning the Portuguese Public Prosecution Service put those to rest with an
explosive statement that turned the socialist leader’s world upside down.
Prosecutors
had evidence that the prime minister’s name had been invoked by suspects in the
course of their shady dealings, which meant Costa was now the subject of an
official investigation in the hands of the Supreme Court of Justice — the only
body with the power to punish crimes committed by Portugal’s head of
government.
By
lunchtime that day, Nov. 7, Costa was out.
In a
televised speech, he announced that he was resigning after eight years as prime
minister. Although he proclaimed his innocence, Costa said the gravity of the
charges driving the investigation were “incompatible with the dignity of the
office.”
The news
landed like a bombshell not only in Lisbon but in capitals across Europe, where
many of Costa’s peers saw him as the ideal successor to European Council
President Charles Michel, whose term ends next fall.
Well-liked
by EU leaders as diverse as French President Emmanuel Macron and Hungarian
strongman Viktor Orbán, Costa was trumpeted as an able administrator and a
skillful negotiator — the perfect qualities to fill that top job.
But the
prime minister’s fall highlighted flaws that had long been an open secret in
Lisbon. Costa’s governance style may have allowed him to claim big victories,
but these were achieved with tactics that ultimately undermined his rule — and
anyone looking beyond the dazzling Portuguese tiles would have noticed serious
cracks in his seemingly solid executive.
Costa has
yet to be formally charged with any crime, and many of his peers still hold out
hope that he will be cleared in time to bring his undeniable talents to the
office at the top of the Europa building.
But as
Portugal heads to the polls this weekend in a national election triggered by
Costa’s resignation, doubts are growing as to whether the man famed for the
deals he struck in Lisbon is truly suited to make new ones in Brussels.
Costa’s path to prime minister
During an
interview with POLITICO in a sitting room within the same official residence
that was raided in November, Costa emphasized the central role that deal-making
has played in his approach to governance.
“In
democracy, politics has to be based on compromise,” he insisted. “One goes into
politics to make deals.”
Costa first
displayed a talent for negotiation in the 1980s, when he got his start in
politics serving in Lisbon’s municipal assembly.
The young
assembly member, who joined the Socialist Party’s youth wing shortly after the
Carnation Revolution brought down the dictatorial Estado Novo regime in 1974,
had grown up in a progressive household in central Lisbon. His father, Orlando
da Costa, was a prolific writer of Goan descent who was persecuted for his
communist ideology; his mother was one of Portugal’s first female journalists,
and led the charge to decriminalize abortion.
Whereas his
parents used the written word to make their living, Costa employed dialogue to
interact with constituents of all classes and backgrounds and hammer out
agreements. In time, he cemented his reputation as a problem-solver skilled at
finding pragmatic solutions to everyday dilemmas.
His talents
eventually caught the attention of national leaders like then-Prime Minister —
and current U.N. Secretary-General — António Guterres, who drafted Costa to
serve first as secretary of state and then minister of parliamentary affairs.
Political
commentator Luís Marques Mendes, who spent years working with Costa while
occupying different roles within the center-right Social Democratic Party, said
the politician took to the post with gusto, easily interacting with the
opposition.
“Costa has
always had an incredible talent for dialogue and for reaching agreements,”
Marques Mendes said. “Ideology isn’t an issue for him; he can sit down and talk
with just about anyone in order to get things done.”
In 2015,
Costa’s ability to build bridges with others won him control of Portugal.
Though he
didn’t score the most votes in that year’s national election, Costa managed to
unseat the center-right incumbent by forging an unprecedented parliamentary
alliance with the far-left Portuguese Communist Party and the Left Bloc group.
“Between
1975 and 2015 there was barely any dialogue within the left,” Costa recalled.
Topics like NATO membership and the adoption of the euro had become
insurmountable “dividing walls” between parties at the time.
“We tore
down those walls by acknowledging that there were some topics on which we would
never see eye to eye … and instead asking, ‘okay, well, what can we all agree
on?’” he said.
“We reached
a deal to work together to end economic austerity and restore the rights that
were taken away by the troika,” he added, referring to Portugal’s international
creditors represented by the European Commission, the European Central Bank and
the International Monetary Fund, which had bailed the country out but imposed
strict economic conditions in return.
The
delicacy of the coalition talks was underscored by the fact that a single
common agreement wasn’t on the table. Instead, Costa drew up individual pacts
with each of his partners over the course of several weeks, securing the needed
parliamentary support to take office.
According
to a high-ranking Portuguese official who spent years working with Costa, and
who was granted anonymity to speak freely, the socialist politician’s ability
to make deals is directly related to his delight in “solving problems.”
“António
Costa is driven by objectives,” the official said. “He’s always looking for
creative solutions … Including some that are sometimes perhaps too creative.”
How Costa
turned around the Portuguese economy
When Costa
became prime minister in November 2015, Portugal was still under the thumb of
the troika, which had bailed the country out of its sovereign debt crisis in
2011.
To gain
power, the socialist leader had promised to reverse the cost-cutting measures
imposed by Portugal’s creditors — a plan that elicited a mix of skepticism and
open hostility in EU capitals.
“A lot of
people thought I was another [Yanis] Varoufakis,” Costa said, referring to the
fiery left-wing economist who had a brief but tumultuous stint as Greek finance
minister earlier that year.
Costa, a
master of realpolitik, understood that if his government was to avoid the chaos
that befell Greece, it would need to adhere to the EU’s fiscal rules and
assuage the doubts of the international economic establishment. He did so by
appointing technocrat Mário Centeno, a veteran of the European Union’s Economic
and Financial Committee, as his finance minister, and by striking a
conciliatory tone with his counterparts in the European Council.
“It was a
double negotiation that involved dialoguing with partners within our left-wing
parliament, like the Communist Party, and at the same time, parlaying with
Brussels,” Costa said. “It wasn’t always easy to reach agreements which broke
with austerity at home but also guaranteed the sustained consolidation of our
public finances in Brussels.”
Costa
considers this balancing act, which allowed his government to “turn the page on
austerity,” as the greatest achievement of his eight years in office.
He also
delights in recalling how he won over skeptics like the late German Finance
Minister Wolfgang Schäuble — nicknamed “the ayatollah of austerity” — who
initially viewed Centeno with unease but came to refer to him as “the Ronaldo
of the ECOFIN,” the gathering of the eurozone’s economic and finance ministers.
.
Pedro Nuno
Santos, the socialist candidate in Sunday’s national election, said Costa
showed Europe that austerity wasn’t the answer. “When it came time to formulate
the Covid economic recovery plan, the EU copied what we did in Portugal,” he
said, stressing that the bloc’s Next Generation EU recovery package reflected
the “spirit and philosophy” of Costa’s financial strategies.
Under
Costa’s leadership, Portugal’s public debt has steadily declined — as has its
deficit. In 2017 the country was able to exit an EU scheme in which the
Commission monitored its spending, while in 2019, it registered its first
budget surplus since the end of the Salazar dictatorship. Meanwhile, the
minimum wage has increased more than 60 percent since 2015, and average
salaries have grown by 27.7 percent.
While
Portugal is undoubtedly in better financial shape now than when Costa arrived,
the “Portuguese miracle” and “end of austerity” narrative that his supporters
push garners mixed reviews.
Nova
Business School public economist Susana Peralta said the country’s economy had
already begun to recover under Costa’s predecessor, and that it was
turbocharged by a tourism boom driven by the country’s viral popularity with
influencers and celebrities like Madonna.
“It’s true
that Costa did things like get rid of the cuts to civil servant salaries
imposed by the troika — which is no small thing — but austerity continued in
other ways: To pay off the public debt, the government limited public spending
dramatically,” she said.
“To this
day, teachers, police officers and courts complain about poor working
conditions and lack of funding,” Peralta added. “Our public services are a
disaster, with people obliged to get up at dawn and stand in line for hours to
get an appointment at their local health center.”
However,
she did concede that Costa’s austerity was at least accompanied by a hopeful
smile.
Unlike the
previous government’s “hurtful, moralizing tone,” Peralta said, “Costa spoke to
people with empathy and gave them the idea of hope, of positive energy that we
had turned the corner. And by negotiating the support of the wider left wing —
especially the Portuguese Communist Party — he got the unions to stop going on
strike and holding protests, which helped reinforce the idea that things were
getting better.”
Portuguese
voters were certainly convinced that life was better with Costa than without
him. During his eight years in office, support for his Socialist Party grew
with each successive election.
Those
advances irritated Costa’s far-left allies, who complained the prime minister
was failing to enact sufficiently progressive policies. Refusing to back his
budget, they triggered a snap election in 2022 — but instead of punishing
Costa, electors rewarded his party with majority control of parliament.
Costa as president of the European Council?
Costa’s
apparent success in Lisbon and popularity in Brussels made him a front-runner
in the race for the bloc’s top jobs, which are expected to be allocated shortly
after June’s European Parliament election.
That’s why
news of the Nov. 7 raid and Costa’s resignation felt like a sucker punch for
Europe’s socialists. Set once again to be the second-largest group in the
European Parliament, the socialists had pinned their hopes on the Portuguese PM
taking the Council presidency.
In the
past, EU leaders have managed to overlook domestic problems that shadowed their
picks for key positions. Commission President Ursula von der Leyen, after all,
was tapped for the post even while an investigative committee of the German
parliament was examining whether lucrative contracts had been awarded without
proper oversight during her time as defense minister.
But after
two successive terms with controversial European Council President Charles
Michel, there’s an appetite for a successor who isn’t a constant source of
headaches. The ideal candidate is now someone who won’t use the job as a
springboard for their personal ambitions, but will instead stick to the agenda
and focus on forging compromises — all things Portugal’s prime minister is
known to do well.
Few in
Brussels would argue that Costa doesn’t have the chops for the job, but a
realization is dawning that he would come with a truckload of baggage.
EU
diplomats told POLITICO that while Costa remains the favored pick of French
President Emmanuel Macron and German Chancellor Olaf Scholz, other leaders have
cooled on his prospective candidacy. The Portuguese socialist’s links to
corruption scandals are seen as a liability in the context of bloc-wide
elections in which the far right is expected to make inroads by campaigning on
the rot within Europe’s mainstream parties.
The
Qatargate cash-for-influence scandal, which mainly involved socialists from
southern Europe, may have raised the bar even further. “Especially in the
North, there are leaders who have very strict requirements for the job” said an
EU official familiar with the discussions. “Some of them say that Costa’s
acquittal will not be enough: The people around him must also be cleared in
order to dispel any kind of suspicion.”
Just how
much legal trouble Costa is in remains unclear, in part because the Portuguese
Prosecutor’s Office has not commented on the case since December.
“I don’t
even know what I am suspected of because that’s never been explicitly stated,”
Costa said in his interview with POLITICO. “No one has spoken to me about this
matter; the only things I know are what everybody else knows.”
Most
updates come from Portuguese press reports based on court transcripts and leaks
from police sources; those suggest that the handling of the case has been
flawed.
Among the
various incidents that have damaged confidence in the prosecution is an error
in the transcription of a wiretap in which “António Costa” was mentioned by
suspects. During a court hearing, investigators were obliged to admit that the
voices in the recording had not been discussing the prime minister, but rather
his economy minister, António Costa Silva.
Costa is
confident he will eventually be cleared of suspicion, but he also acknowledged
it may be a while before Portugal’s notoriously slow judicial system makes any
such announcement.
“I don’t
know how many chapters this particular story will have,” he said. “But I’m sure
that the last one will involve the recognition that I have done nothing
illegal, that I did not witness anything illegal, and that there was nothing
objectionable regarding my involvement in any of these processes.”
Costa’s
fall highlighted flaws that had long been an open secret in Lisbon | Patricia
de Melo Moreira/AFP via Getty Images
Rui
Gustavo, a veteran judicial reporter with Portuguese weekly Expresso, said that
what is known about the allegations against Costa suggests they are “very, very
weak;” however, he dismissed the notion that this was a “nonsense case.”
“If the
prime minister interfered to favor a company, if he’s been involved in
influence-peddling, it’s tremendously serious and it has to be investigated,”
he said.
If Costa
isn’t cleared, socialist support will likely coalesce around Danish Prime
Minister Mette Frederiksen to preside over the Council. But Frederiksen isn’t
an ideal choice: Her country’s tough immigration policies are disliked by other
European socialists, and there’s a desire to have a southern European occupying
at least one of the EU’s top jobs.
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“Having
Costa as European Council president would be an honor for Portugal, and having
such an obvious Europhile in the post would be good for Europe,” said
commentator Marques Mendes. “Everyone knows he wants the job, and he definitely
has the negotiating skills to strike deals between left and right.”
“This case
is a shame,” he added. “I don’t think he’ll ultimately be indicted, but if this
investigation is ongoing when it comes time to make the choice, I don’t think
he’ll be able to occupy that post.”
Costa government’s long list of scandals
Costa’s
reputation in Brussels was dealt a major blow by the Nov. 7 raid, but in
Portugal his governance style has aroused doubts for years.
Indeed,
it’s unclear how long Costa’s current government would have lasted even without
the probe. His Socialist Party held an absolute majority of seats in the
parliament, but the executive was falling apart: Over a dozen senior officials
had resigned in the two years since the last election, some with indictments
for corruption or malfeasance.
Few in
Lisbon believe Costa himself is corrupt: The socialist leader’s personal
reputation has remained untarnished during three decades in executive roles
within the Portuguese government. But it is broadly perceived that questionable
deeds were committed within his inner circle by less pristine “problem solvers”
whom the prime minister tapped to get things done.
One of the
most notorious figures in Costa’s clique was his self-proclaimed “best friend”,
attorney Lacerda Machado, who was drafted by the prime minister to represent
his executive in extremely sensitive talks — including on the future of
state-owned airline TAP.
These
mediations were initially done on a pro-bono basis, freeing Lacerda Machado of
the oversight to which a bureaucrat or government official would be subject. It
was only after the opposition complained that Costa grudgingly signed a service
contract with his friend, insisting there was “no reason to call into question
the collaboration as it has been provided.”
Lacherda
Machado was among those arrested in last November’s raids and is suspected of
attempting to use his influence within the government to favor a company that
had hired him as a consultant.
Commentator
Marques Mendes said while it was normal for a politician driven by goals to
become frustrated with Portugal’s slow bureaucracy, Costa’s desire to achieve
his objectives had led him to tolerate “informal structures that turned out
badly.”
“Pragmatism
can be a good thing, but it can be problematic when you try to solve matters of
State the way you would some problem at home,” he said.
Costa was
additionally handicapped, Marques Mendes observed, by his tendency to surround
himself with people with whom he has a personal relationship — even if there
are public doubts about their suitability for a given post.
One such
example is economist Escária, a former adviser to disgraced Prime Minister José
Sócrates, the former socialist leader who has been the subject of a corruption,
money laundering and tax fraud case for the past decade.
Escária was
tapped by Costa to serve in his first government but resigned in 2017 after he
was accused of accepting undisclosed gifts in the form of trips to the UEFA
Euro football final paid for by a Portuguese oil company.
Costa
unexpectedly re-hired him in 2020 and elevated him to the post of chief of
staff; Escária was the reason the prime minister’s official residence was
raided on Nov. 7. When the police came to arrest him for alleged
influence-peddling, they discovered €75,800 in undeclared cash stashed in his
office.
Costa’s
decision to rehire Escária underscores his almost irrational loyalty to his
inner circle, whom he has relied on and defended even when they’ve become a
liability to his government.
In 2017 the
prime minister insisted on standing by Internal Administration Minister
Constança Urbano de Sousa, who oversaw the country’s crisis management
structure as scores died in catastrophic forest fires that overwhelmed
Portugal’s emergency services. Although she attempted to resign, Costa only let
her go after the country’s president gave a speech suggesting he would dissolve
parliament if the government didn’t do a better job of protecting its citizens.
The prime
minister similarly stood by a defense minister indicted in connection with an
arms-theft scandal; an internal administration minister implicated in a grisly
car accident; and an infrastructure minister suspected of lying to a
parliamentary commission.
Costa
rejected the criticisms of his team, saying he had to respect the presumption
of innocence and couldn’t drop members of his government based on media rumors.
“I note with satisfaction that all the members of my governments who have been
investigated have subsequently had their cases dismissed, or ultimately been
acquitted,” he added.
Presidency
Minister Mariana Vieira da Silva also disputed the idea that Costa had made
poor choices when assembling his inner circle, or had turned a blind eye to
shady dealings within his administration.
“Our
decision process has always followed the government’s normal timings and
procedures,” she said. “I have not seen anything out of the ordinary when it
comes to making decisions and solving problems; the process is transparent and
known to everyone.”
In his
interview, Costa — whose term as caretaker prime minister could end as early as
next week, when Portugal’s president is expected to ask the winner of Sunday’s
national election to form a new government — said he was confident citizens
would remember him for his successes in office, and not for the scandals that
forced him out.
“A case
like this is obviously frustrating for someone who has dedicated the past 30
years of their life to public service,” he said. “But where there’s doubt,
there has to be an investigation … And I have absolute peace of mind about what
it will conclude.”
Unfortunately
for Costa, those set to decide his political future may not feel the same way.
Jacopo Barigazzi contributed reporting.
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