Minority Government Courts Rivals to Fund Portugal’s 2025 Defence Leap

Portugal’s leaders have opened a high-stakes negotiation that could reshape both the country’s military posture and next year’s state budget. The government wants to pour an extra €1.3 B into defence in 2025—enough to hit NATO’s 2 % spending target—but it cannot pass the plan without help from rival parties. For foreigners watching Portugal’s political mood swings, the debate reveals how a small Atlantic nation tries to balance alliance commitments, fiscal prudence and social priorities all at once.

A minority government looking for allies

Prime Minister Luís Montenegro heads a centre-right coalition that rules with only 80 of the 230 seats in parliament. Without opposition votes, no major bill—including the 2025 budget—can survive. The Socialists, still the largest single party, hold the key. Their leader José Luís Carneiro has proposed a three-month window to forge what he calls an Acordo Estratégico, a broad pact covering defence investment and long-term industrial policy. Montenegro immediately signalled he is on board, calling Socialist buy-in “essential” for national credibility at home and inside NATO.

Why the sudden rush to 2 %

Portugal has hovered around 1.4 % of GDP in defence outlays for years, trailing most of the alliance. Vilnius, Madrid and Washington have turned up the pressure, and Lisbon now promises to reach the 2 % marker in 2025 instead of 2030. That fast-track timetable requires an additional €1.3 B next year on top of existing programmes. Defence officials insist the figure is realistic because NATO accounting lets them include pensions, military housing and dual-use infrastructure—items that often blur the line between military and civilian budgets.

The fiscal headache everyone sees coming

Economists from the public watchdog CFP to private think tanks agree on one thing: €1.3 B is a large cheque for a government whose surplus margin is forecast at just 0.3 % of GDP. Finance Minister Joaquim Miranda Sarmento has hinted at offsetting measures—higher fuel duties, trimmed corporate tax breaks and “technical” reclassification of spending—yet none of those ideas has been fleshed out in public. Critics warn that to keep Brussels happy, the cabinet may need to sacrifice investments in housing, health or the green transition.

Where the money would actually land

Rough sketches from the Defence Ministry point to three priority buckets. First, continued support to Kyiv in the form of ammunition, training slots and maintenance for Portuguese-donated Leopard tanks. Second, early purchases under the Military Programming Law: medium-range drones, coastal patrol vessels refitted at the Arsenal do Alfeite, and new barracks with solar micro-grids. Third, investments classified as “dual”: cyber-defence platforms that can also shield critical national infrastructure, plus R&D partnerships with universities on space-based maritime surveillance. Officials privately admit that cyber still receives less than 0.2 % of total defence cash, a gap they want to narrow.

Industry hopes—and scepticism

Portugal’s aerospace cluster around Évora and Ponte de Sor already exports more than 90 % of its output. Executives there see the defence splurge as a springboard for higher-value maintenance work on Embraer and Airbus fleets. The business agency AICEP has earmarked defence as a priority for foreign investment, promising fast-track permits for factories that locate in interior regions. Labour unions are cautiously optimistic about job creation but warn that skilled technicians are scarce; without up-skilling programmes, benefits could leak abroad in the form of imported labour.

Opposition lines in the sand

Parties to the left of the Socialists are unimpressed. Livre calls the 5 %-of-GDP ambition floated by former US president Donald Trump a “shopping list for American arms makers” and wants Lisbon to block any future escalation beyond 2 %. The Communists condemn what they label a “dangerous bellicose strategy dictated by Washington”. On the right, populist party Chega says it will not back extra spending unless it gains seats in cabinet—an offer Montenegro has repeatedly refused.

What expats should watch next

The clock is ticking: the draft state budget typically lands in parliament by mid-October. If a cross-party deal on defence is not sealed by then, Portugal could tumble into a snap election or revert to stop-gap spending, freezing public investment projects. That uncertainty would affect everything from residency case backlogs to university grants. For now, expats may take comfort in one Portuguese constant: consensus often emerges at the eleventh hour, after intense behind-the-scenes bargaining.