(Bloomberg) -- Portugal is heading to its third early election in just over three years after parliament toppled Prime Minister Luis Montenegro’s center-right minority government in a confidence vote on Tuesday night.
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President Marcelo Rebelo de Sousa will hold meetings with parties on Wednesday, a necessary step before he can formally call an election. Sousa, who has the authority to dissolve parliament and decide whether to call a vote, said last week that the snap election could take place on May 11 or May 18 at the earliest.
The government’s ouster may delay key decisions, including a plan to privatize state-owned airline TAP SA this year and investments in infrastructure such as high-speed railway links. Montenegro’s administration, which took office less than a year ago, also aimed to increase defense spending like other European nations.
Portuguese 10-year bonds were little changed on Wednesday. The yield on 10-year notes rose one basis point to 3.41%, less than an increase of three basis points for comparable German debt. The country’s PSI benchmark stock index rose less than 0.1% as of 11:35 a.m. in Lisbon.
Montenegro, 52, has led the PSD party since 2022 and says he will seek reelection as premier. It will likely be a close race against Socialist leader Pedro Nuno Santos, 47, whose party is currently the biggest opposition group. Santos, a former infrastructure minister, has been a defender of the state’s role in controlling certain businesses, including the country’s carrier.
A poll published by TVI on Sunday showed the ruling AD coalition leading with 34% support, followed by the opposition Socialists with 29% and far-right party Chega with 14%. Another opinion poll published by Jornal de Negocios on Tuesday showed the Socialists leading the ruling coalition by 1.5 percentage point.
The importance of political stability was highlighted by Pedro Castro e Almeida, the head of Banco Santander SA’s Portuguese unit, at a conference in Lisbon on Wednesday.
“When we look at attracting foreign investment, implementing the Recovery and Resilience Plan, representation in international or European forums, naturally having a stable government makes all the difference,” Castro e Almeida said.
The premier requested the confidence vote last week after struggling to put an end to speculation about potential conflicts of interest related to a company owned by his family. He will likely keep facing questions about the firm.