LISBON, Nov 7 (Reuters) – Portugal Prime Minister Antonio Costa resigned on Tuesday, hours after prosecutors arrested his chief executive in an investigation into alleged corruption in his administration’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 meeting with President Marcelo Rebelo de Sousa.
He said his conscience was clear, but he would not stand for a fourth term as prime minister.
“The dignity of the prime minister’s activities, his integrity, his good conduct and the practice of any criminal act are beyond doubt,” Costa said.
The president must now decide whether to allow Costa’s Socialists, who have a majority in parliament, to form a new government or to dissolve parliament and hold elections.
Carlos Cesar, leader of the Socialists, said his party was ready for “any situation”, while Luis Montenegro, head of the main opposition Social Democratic Party, said he was ready for early elections.
“The corruption of the government must no longer be a waste of time,” Montenegro said.
Parliament was scheduled to vote on the 2024 budget bill later this month. There are concerns that the political crisis could affect budget approval as well as the start of the privatization of TAP, the Portuguese national airline.
“Elections are inevitable after the sudden death of a government,” said political scientist Adelino Maltes. Antonio Costa Pinto of the University of Lisbon did not rule out another Socialist prime minister, but said a snap election was the most likely option.
Portuguese shares fell about 3% and the narrow gap between the European Union country’s 10-year government bond yield and the euro zone benchmark German Bund widened to 69 basis points from 65 bps on Monday.
Projects examined
The prosecutor’s office said on Tuesday that five people had been arrested as part of the investigation, including Costa’s chief of staff, Vitor Escaria, whose offices were raided along with several government buildings.
It said in a statement that Infrastructure Minister João Calamba, who previously served as energy secretary, and Nuno Lacasta, head of environmental organization APA, are formal suspects and will appear before a judge.
Galamba’s office and APA did not respond to requests for comment.
Prosecutors are investigating allegations of corruption and influence peddling in Barroso and Montalegre lithium exploration concessions in northern Portugal, a plan for a hydrogen plant in the port of Sines and a mega data center investment there.
They said they were aware that the suspects had used Costa’s name and authority to “obstruct processes” related to the deals and that the Supreme Court would examine Costa’s possible role in the deals.
Costa said he was fully prepared to cooperate with the justice system.
“At risk may be … facts capable of constituting crimes such as malpractice, active and passive corruption and influence peddling of politicians,” the prosecutor’s office said.
With more than 60,000 metric tons of known lithium reserves, Portugal is considered a hub for Europe’s efforts to secure the battery value chain and reduce dependence on imports.
The APA earlier this year granted environmental approvals to local company Lusorecursos to extract battery-grade lithium in Montalegrave and to London-based Savannah Resources ( SAVS.L ) to build its own mine in Barroso.
Contacted by Reuters, 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 its employees were targets of the investigation. Barroso’s lithium projects continued unchecked, it added.
Lithium projects have faced fierce opposition from local residents and environmentalists.
In a joint statement, Portuguese anti-mining groups said Tuesday’s developments were proof that the mining process was not conducted transparently, and they called for the “immediate cancellation” of all lithium projects.
Worries about the future
Costa will remain in office until the end of the presidency. Rebelo de Souza called political parties to a meeting on Wednesday and his advisory body, the Council of State, on Thursday.
Since coming to power in 2015 after the debt crisis and international bailout, Costa has presided over a period of strong economic growth, during which his successive governments have eliminated budget deficits and reduced the debt burden, winning praise in Europe for sound fiscal policies. .
But Costa’s last term, when his party won a surprise majority in snap elections in early 2022, was marred by scandals, including controversies over state-owned airline TAP in January 2023, when the opposition demanded his government resign.
Carsten Breschi, ING’s global head of macro, expected some fallout thanks to Portugal’s hard-earned reputation in financial markets.
Reporting by Caterina Demoni, Patricia Rua, Sergio Goncalves, Andrey Caleb and Miguel Pereira; Additional reporting by Jesus Aguado in Madrid; Editing by Andre Caleb, Emilia Sithole-Madaris and Mark Heinrich
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