Portugal's 2026 Budget Bill Clears First Hurdle Amid Political Complexities

In a pivotal move, Portugal's parliament on Tuesday approved the centre-right minority government's 2026 budget bill during its initial reading. This outcome was significantly influenced by the opposition Socialist Party's abstention, despite strong opposition from the far-right Chega and several smaller parties. The bill aims to achieve marginally stronger economic growth of 2.3%, following a predicted expansion rate of 2.0% this year. The government is targeting a small surplus, maintaining a trend for the fourth consecutive year, despite implementing new tax reductions for businesses and lower-income households.

The legislative body, consisting of 230 seats, passed the budget bill by a vote of 91-79, with 60 legislators choosing to abstain. Notably, Chega emerged as the second-largest political force in parliament, securing 60 seats during a snap election held in May, while the Socialist Party elected 58 lawmakers, becoming the third-largest faction.

The budget outlines a projected surplus of only 0.1% of the GDP, slightly lower than the 0.3% forecast for 2025. Prime Minister Luis Montenegro cautioned that there is limited scope for negotiating further measures. During the debate, Socialist Party leader Jose Luis Carneiro expressed skepticism about the budget's credibility but emphasized that his party's abstention aimed to sustain political stability. Carneiro also urged the government to address enduring issues such as the housing crisis and challenges in public healthcare.