Lisbon's Minority Cabinet Courts All Parties, and Expats Should Watch

Foreign residents following Portuguese politics woke up to an unusually conciliatory message from Prime-Minister Luís Montenegro this week: the minority government, he said, is “ready to sit down with every party in parliament.” The statement sounds routine in Lisbon’s ritualised rhetoric, yet it carries weight now that crucial votes on the Orçamento do Estado for 2026, tax reform and housing are only months away. For expats, the outcome of these negotiations will dictate everything from IRS brackets to short-term rental rules and even how quickly residency paperwork gets processed.

Why non-Portuguese residents should care

Montenegro’s pledge means the cabinet is hunting for support across the ideological spectrum instead of locking itself into a single alliance. That decision keeps policy horizons fluid. A deal with the centre-left Socialists could soften aggressive income-tax cuts but protect social spending, while concessions to the far-right Chega might tighten immigration and property rules. Either way, foreign workers, retirees and digital nomads will feel the ripple effect in take-home pay, visa requirements and housing costs.

Portugal’s 2024 census showed that nearly 800,000 foreign nationals now call the country home, up from 660,000 in 2019. Their growing economic clout—foreigners account for 11% of individual income-tax revenue—means that every budget clause on tax or real-estate is effectively a pocketbook issue for newcomers.

Montenegro’s balancing act inside the Assembleia da República

Running the government with just 80 of 230 seats, Montenegro’s Democratic Alliance (AD) needs at least 36 extra votes to pass legislation. The prime-minister insists he has “no preferred partners,” echoing Finance Minister Joaquim Miranda Sarmento’s line that even the upcoming reprivatisation of TAP “will go to whoever offers the best value to the state.” Translation: everything is a bargaining chip.

The ruling PSD knows it cannot rely on Chega alone—their hard-line stance on migration would alienate moderates—nor can it lean exclusively on the Socialists, who refuse to be treated as just another vote. Navigating between these poles is now the core skill of the cabinet’s parliamentary whip, Hugo Soares, whose mission is to stitch together ad-hoc coalitions on every bill.

What each opposition party wants in return

• The Socialist Party (PS) signals it may abstain on the 2026 budget if the government funds public housing and defence modernisation. It warns, however, that repeating last month’s immigration compromise with Chega would be a red line.

• Chega demands deeper cuts to the lower IRS brackets and a seat at the table on justice and interior-affairs reforms. In exchange, the party would back the tax package that foreigners benefit from when declaring dual income streams.

• Iniciativa Liberal (IL) supports slashing IRC corporate tax to 15%, a move that could lure more start-ups to Lisbon and Porto. But its leader Rui Rocha refuses any arrangement that also satisfies Chega.

• The Left Bloc and Communists oppose further deregulation of rents and want tougher caps on Local Alojamento licences in tourist hotspots such as Alfama and Lagos.

For expats, these positions translate into real-world stakes: lower corporate tax might boost hiring at foreign-owned tech hubs, while rent caps could restrict supply in neighbourhoods already tight on long-term leases.

Upcoming votes that will test the “open door” mantra

The first trial arrives in October when the draft State Budget for 2026 reaches committee stage. Montenegro has promised an additional €500M in IRS relief but must still plug a projected €1.2B revenue gap created by slower growth. Talks over a broader “Simplex Fiscal” reform package—aimed at merging several surtaxes—start in September, and housing amendments are pencilled in for November.

Failure to pass the budget would trigger either a presidentially mediated compromise or new elections, scenarios that historically freeze public-administration hiring and delay residence-permit renewals by months. The Immigration and Borders Service’s replacement agency, AIMA, is already battling a backlog of 200,000 pending cases.

Lessons from Portugal’s past minority governments

Political veterans recall that António Guterres in the 90s kept a minority executive afloat by coaxing both CDS-PP and PSD to abstain on budgets, united under the shared goal of joining the euro. A generation later, António Costa’s Geringonça survived a full term thanks to written pacts with the Left Bloc and Communists. Those precedents suggest two golden rules: identify a national project bigger than party lines—back then it was the euro, today it could be NATO spending or climate adaptation—and rely on skilled negotiators able to sell compromises to their bases.

Montenegro hopes to emulate Guterres’ flexible model rather than Costa’s fixed blocs, betting that economic pragmatism, not ideology, can stitch temporary majorities. Still, as political scientist Marina Costa Lobo notes, the electorate is less forgiving now; social media outrage cycles make quiet horse-trading harder to sustain.

What foreign residents should watch next

Keep an eye on three dates: mid-September for the tax-reform outline, late-October for the first budget vote and early-November for the housing-law amendments. If PS signals an abstention soon, markets will calm and the euro-to-dollar rate—vital for many remote workers’ salaries—should stay steady. If Chega extracts immigration concessions, expect tighter entry rules and possible tweaks to the Digital Nomad Visa.

Either way, the government’s claim of having “no preferred partners” puts every opposition party in play—and by extension, puts every expat’s wallet and paperwork on the negotiating table.