Portugal risks political crisis amid PM-president rift

By Sergio Goncalves and Andrei Khalip

LISBON (Reuters) - Portuguese opposition parties called on the president on Wednesday to use his power to dissolve parliament over a growing scandal around state-owned airline TAP, although analysts see the majority Socialist government surviving - for now at least.

Infrastructure Minister Joao Galamba, who oversees TAP, submitted his resignation on Tuesday. But Prime Minister Antonio Costa decided to keep him in the job, snubbing President Marcelo Rebelo de Sousa who had made clear he wanted Galamba out.

"The only way to restore democratic normality is to dissolve parliament and to call snap elections," said Rui Rocha, head of the Liberal Initiative party, calling Tuesday's episode an attempt to humiliate the president.

Costa's Socialists won an outright parliamentary majority in January 2022, but his third government in a row has been plagued by instability even as it eked out one of the strongest economic expansions in the European Union, reducing debt and drawing praise from Brussels.

Calling a snap election would make it more difficult for a caretaker government to apply vital EU pandemic recovery funds and support companies and families just as growth slows.

More than 10 ministers and secretaries of state have left their posts in the past year, at least two of them linked to the scandal at TAP over an irregular severance payment to an ex-board member, triggering prior warnings from the president that he could disband parliament if the government loses credibility.

"I will respect whatever decision the president makes, but we assure him and the country that we are prepared to replace this chaotic government," Luis Montenegro, leader of the main opposition Social Democratic Party (PSD), told reporters.

The high-level clash could still lead to a full-blown constitutional crisis, analysts said, but the president will have to tread carefully and consider the potential outcome of a snap election.

"Dissolution is a power that presidents have, without limitations... But the president cannot use this weapon at the risk of the electorate producing an identical or worse situation than the one we have," said political scientist Andre Freire.

Far-right party Chega, the third-strongest in parliament, is seen as the main beneficiary of the scandals and the only feasible partner for the centre-right PSD, which could win the next election, as some polls show, but without a working majority to govern.

Antonio Costa Pinto of Lisbon University said the trend in Europe was for centre-right parties to negotiate government pacts with populist and radical parties, suggesting that the president may consider such a solution worse than a Socialist government.

He added though that if the government keeps making mistakes, Rebelo de Sousa would have no other solution left.

In Freire's view, the unprecedented fallout, in which Costa unexpectedly demonstrated his strength to the president, "does not necessarily mean they will enter into constant turbulence".

(Reporting by Sergio Goncalves and Andrei Khalip; Editing by Nick Macfie)