Amidst wars and other armed conflicts, the European region has been in conflictuous past few months regarding political stability and development within the European Union. A country that has been inserted in the news spotlight in recent times is Portugal, with the never-ending scandals and political decisions that are culminating in turning the already tumultuous country even further down the hill.
To contextualize the recent chaotic events, we turn to the most recent decision made by President Marcelo Rebelo de Souza that there will be a snap parliamentary election in March 2024, following the unexpected resignation of the country’s Prime Minister over a corruption investigation, specifically over the alleged irregularities committed by the majority socialist administration of his in regards to the handling of lithium mining and hydrogen projects across the country.
The anticipation of the elections by over two years was a plan made by the president to allow for some more time for the parliament, which was dissolved on the 15th of January, to have a final vote to approve the state budget, which is due on the 29th of November, and for the socialist party to be able to select a new leader before the election.
The political stability that might come from this call for early elections might actually be seen in the eyes of those involved in all the political issues. Among the voters and other analysts, there is a comprehensible fear that the economy will worsen, allowing for an even deeper level of political instability. And one of the most worrying consequences of all this is exactly the impact that it might have on the country’s economy.
In the short term, there is some good news regarding the budget decision. According to André Azevedo Alves, a political science professor in Portugal and London, with the new elections in March, the budget is well likely to be approved, removing some uncertainty about economic instability.
The new budget represents a pivotal step towards fostering economic resilience and social inclusivity in Portugal. By introducing a series of strategic measures, the government aims to alleviate the financial burden on the middle class through a reduction in income taxes. This move not only provides much-needed relief to hardworking individuals and families but also contributes to fostering a more equitable distribution of wealth.
On top of that, the budget places a strong emphasis on addressing the needs of the most vulnerable in Portugal. Social benefits have been intricately tailored to target the poorest segments of the population, ensuring that essential resources and support are directed where they are needed most. This compassionate approach not only seeks to uplift those facing economic troubles but also reinforces the government’s commitment to building a more socially inclusive nation.
Recognizing the pressing need to revitalize economic growth, the budget allocates a substantial increase in public investment. This strategic infusion of funds is designed to act as a catalyst for overcoming the challenges posed by economic conditions. By prioritizing key sectors and implementing target initiatives, the government aims to stimulate economic activity, create employment opportunities, and lay the groundwork for a sustainable recovery.
But moving on from the consequences for the internal stability of the country, we must also discuss how such actions can have a deep impact on the European Union. There are explicit undeniable consequences regarding the economic impact, financial stability, policy coordination challenges, and EU integration that all suffer from what’s happening in one of the member states.
The economic aspect of their political crisis leads to a significant level of market uncertainty. A lack of political stability can lead to an uncertain financial market. For example, if there’s instability in Portugal’s fiscal policies, many investors might hesitate to invest in the country, leading to fluctuations in stock prices that can reach across the EU.
The union might also suffer from general financial instability, much like the one they went through during the Greece and Eurozone crises. Borrowing costs rose; the banking sector was strained; there was market erosion and a significant impact on the Euro, which ultimately devalued amidst all the issues.
In conclusion, the recent developments on the topic of political instability have triggered both internal and external repercussions. While the anticipated early elections may bring short-term relief, the overall consequences for the country’s stability are still quite uncertain. As Portugal navigates its political and economic landscape, the EU must navigate the potential for broader economic and financial instability within its member states.
The European Institute for International Law and International Relations
REFERENCES
https://www.reuters.com/world/europe/portugals-pm-costa-resigns-over-corruption-investigation-2023-11-07/#:~:text= LISBON, Nov. 7 (Reuters), hydrogen projects in the country.
