- Prosecutors are investigating lithium and hydrogen deals
- PM Costa is the subject of a related investigation
- Says his conscience is clear and he’s cooperating with the investigation
- The president will address the nation on Thursday
LISBON, Nov 7 (Portal) – Portuguese Prime Minister Antonio Costa resigned on Tuesday, hours after prosecutors arrested his chief of staff as part of an investigation into alleged corruption in his government’s handling of lithium mining and hydrogen projects.
Costa, who prosecutors said was the target of a related investigation, announced the decision in a televised statement after a meeting with President Marcelo Rebelo de Sousa.
He said his conscience was clear but he would not run for prime minister for the fourth time.
“The dignity of the office of prime minister is not compatible with any suspicion of his integrity, his good behavior, and even less with the suspicion of committing a crime,” Costa said.
It is now up to the president to decide whether to allow Costa’s Socialists, who have a majority in parliament, to form a new government or to dissolve parliament and call new elections.
Socialists leader Carlos Cesar said his party was prepared for “any scenario,” while Luis Montenegro, leader of the main opposition Social Democrats, said he was prepared for early elections.
“Degrading the government requires that no more time be wasted,” Montenegro said.
Parliament was due to vote on the 2024 budget draft later this month. There are concerns that the political crisis could have an impact on the budget adoption and the start of the privatization of the Portuguese national airline TAP.
“It is inevitable that there will be elections after the sudden death of the government,” said political scientist Adelino Maltez. Antonio Costa Pinto of the University of Lisbon did not rule out the possibility of another socialist prime minister, but also said an early election was the most likely option.
Portuguese shares fell about 3% and the closely watched gap between the EU country’s 10-year government bond yield and the euro zone benchmark German Bund widened to 69 basis points from 65 basis points on Monday.
PROJECTS EXAMINED
Prosecutors said earlier on Tuesday that five people had been arrested as part of the investigation, including Vitor Escaria, Costa’s chief of staff, whose offices and several government buildings were searched.
A statement also said that Infrastructure Minister Joao Galamba, who previously served as energy minister, and the president of the environmental agency APA, Nuno Lacasta, were formal suspects and would appear before a judge.
Galamba’s office and APA did not respond to requests for comment.
Prosecutors are investigating alleged bribery and influence peddling in the Barroso and Montalegre lithium exploration concessions in northern Portugal, a hydrogen plant project in the port of Sines and a mega-investment in a data center there.
They said they learned that the suspects had used Costa’s name and authority to “release” proceedings related to the deals and that the Supreme Court would consider Costa’s possible role in the deals.
Costa said he was “fully available to cooperate” with the justice system.
“At stake are potentially … facts that may constitute criminal offenses such as abuse of office, active and passive corruption of politicians and influence peddling,” the prosecutor’s office said.
With more than 60,000 tonnes of known lithium reserves, Portugal is seen as central to Europe’s efforts to secure a larger part of the battery value chain and reduce dependence on imports.
APA earlier this year granted environmental permits to local company Lusorecursos to extract battery-grade lithium in Montalegre and to London-based Savannah Resources (SAVS.L) to develop its own mine in Barroso.
Contacted by Portal, Lusorecursos had no immediate comment.
Savannah said in a statement that it was cooperating with authorities who visited some of its locations, but that neither the company nor any of its employees were the target of the investigation. Work on the Barroso lithium project would continue unhindered, it said.
Lithium projects have faced strong opposition from local residents and environmentalists.
In a joint statement, Portuguese anti-mining groups said Tuesday’s developments were evidence that mining processes had not been carried out in a transparent manner and called for the “immediate cessation” of all lithium projects.
WORRIES ABOUT THE FUTURE
Costa will remain in office until the President’s decision. Rebelo de Sousa convened political parties for consultations on Wednesday and his advisory body, the Council of State, on Thursday.
Since coming to power in 2015 in the wake of a debt crisis and an international bailout, Costa has enjoyed a period of strong economic growth, with his successive governments eliminating the budget deficit and reducing the debt burden, drawing praise in Europe for his sound fiscal policies.
But Costa’s last term, which began in early 2022 when his party surprisingly won an absolute majority in a snap election, was marked by scandals, including controversies over state airline TAP in January 2023 that led opposition parties to call for his government to resign .
Carsten Brzeski, global head of macro at ING, expected little impact on financial markets there due to Portugal’s hard-earned reputation.
Reporting by Catarina Demony, Patricia Rua, Sergio Goncalves, Andrei Khalip and Miguel Pereira; additional reporting from Jesus Aguado in Madrid; Edited by Andrei Khalip, Emelia Sithole-Matarise and Mark Heinrich
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