King Carlos I of Portugal confirmed colonial treaties of the 19th century that stabilized the situation in Portuguese Africa. These agreements were, however, unpopular in Portugal, where they were seen as being to the disadvantage of the country. In addition, Portugal was twice declared bankrupt—first on 14 June 1892 and again on 10 May 1902—causing industrial disturbances, socialist, and republican antagonism and press criticism of the monarchy. Carlos responded by appointing João Franco as Prime Minister and subsequently accepting Parliament's dissolution. In 1908, Carlos I was killed in a regicide at Lisbon. The Portuguese monarchy lasted until 1910 when, through the 5 October revolution, it was overthrown and Portugal was proclaimed a republic. The overthrow of the Portuguese monarchy in 1910 led to a 16-year struggle to sustain parliamentary democracy under republicanism – the Portuguese First Republic (1910–1926).
The 28 May 1926 coup d'état or, during the period of Estado Novo, the National Revolution (Portuguese: Revolução Nacional), was a military action that put an end to the chaotic Portuguese First Republic and initiated the Ditadura Nacional (National Dictatorship) (years later, renamed Estado Novo).
With fascist organizations being popular and widely supported across many countries (like Italian Fascism and Nazism) as an antagonist of communist ideologies, António de Oliveira Salazar developed the Estado Novo which can be described as a right leaning corporatist regime of para-fascist inspiration. The basis of his regime was a platform of stability, in direct contrast to the unstable environment of the First Republic. According to some Portuguese scholars like Jaime Nogueira Pinto and Rui Ramos, his early reforms and policies changed the whole nation since they allowed political and financial stability and therefore social order and economic growth, after the politically unstable and financially chaotic years of the Portuguese First Republic (1910–1926). After the First Republic, when not even public order was achieved, this looked like an impressive breakthrough to most of the population; Salazar achieved his height in popularity at this point. This transfiguration of Portugal was then known as A Lição de Salazar – "Salazar's Lesson". Salazar's program was opposed to communism, socialism, and liberalism. It was pro-Catholic, conservative, and nationalistic. Its policy envisaged the perpetuation of Portugal as a pluricontinental empire, financially autonomous and politically independent from the dominating superpowers, and a source of civilization and stability to the overseas societies in the African and Asian possessions.
The Estado Novo was an authoritarian regime with an integralist orientation, which differed greatly from other fascist regimes by its lack of expansionism, lack of a fanatical leader, lack of dogmatic party structure, and more moderate use of state force. It incorporated, however, the principles for its military from Benito Mussolini's system in Italy. Salazar was a Catholic traditionalist who believed in the necessity of control over the forces of economic modernisation in order to defend the religious and rural values of the country, which he perceived as being threatened. One of the pillars of the regime was the PIDE, the secret police. Many political dissidents were imprisoned at the Tarrafal prison in the African archipelago of Cape Verde, on the capital island of Santiago, or in local jails. Strict state censorship was in place.
Executive authority was nominally vested in a president, elected by popular vote for a five-year term. On paper, the president was vested with sweeping executive and legislative powers, making him a virtual dictator. In practice, however, the real power was held by the prime minister, Salazar. The legislature was a unicameral National Assembly, elected every four years. An advisory body, the Corporative Chamber, nominally represented economic, social and cultural organizations. While opposition candidates theoretically could stand for office after 1945, in practice the system was so heavily rigged in favour of the official party, the National Union, that they had no realistic chance of winning.
The Estado Novo enforced nationalist and conservative Roman Catholic values on the Portuguese population. The whole education system was focused toward the exaltation of the Portuguese nation and its five-century old overseas territories (the Ultramar). The motto of the regime was "Deus, Pátria e Familia" (meaning "God, Fatherland, and Family," and obviously intended as a counterpart to the French Revolution's "Liberté, égalité, fraternité"). After 1945, the main raison d'être of the regime became resistance to the wave of decolonization which swept Europe after the end of World War II.
The Estado Novo accepted the idea of corporatism as an economic model. Although Salazar refused to sign the Anti-Comintern Pact in 1938, the Portuguese Communist Party was intensely persecuted. So were Anarchists, Liberals, Republicans, and anyone opposed to the regime. The National Union embraced a wide array of politics, passing through monarchism, corporatism, para-fascism and nationalism.
The Legião Nacional was a popular militia similar to the Italian Blackshirts. For young people, there was the Mocidade Portuguesa, an organization similar in organization to the Hitler Youth of Nazi Germany, but not in ideology; the Estado Novo and the Nazis had little time for each other as Portugal made an effort to avoid racism and anti-Semitism. These two organizations were heavily supported by the State and imposed a martial style of life.
Portugal was officially neutral in the Spanish Civil War (1936–39), but quietly furnished help to the nationalists of Francisco Franco. During the Second World War (1939-45), Portugal remained officially neutral, but the regime had more pro-Axis sympathies; Salazar even expressed support for the German invasion of the Soviet Union. From 1943, Portugal favored the Allies, leasing air bases in the Azores, because the Azores islands could be invaded by the Allies. Portugal traded with both sides, but cut off vital shipments of tungsten and rubber to Germany in 1944, after heavy Allied pressure. Lisbon was the base for International Red Cross operations aiding Allied POWs, and a main air transit point between Britain and the U.S.
In 1942, Australian troops briefly occupied Portuguese Timor, but were soon overwhelmed by invading Japanese. Salazar worked to regain control of East Timor. He admitted several thousand Jewish refugees. Lisbon maintained air connections with Britain and the U.S. Lisbon was a hotbed of spies and served as the base for the International Red Cross in its distribution of relief supplies to POWs.
Salazar's policy after the war was to provide a certain level of liberalisation in politics, in terms of organised opposition with more freedom of the press. Opposition parties were tolerated to an extent, but they were also controlled, limited, and manipulated, with the result that they split into factions and never formed a united opposition. He permitted the formation of Movement of Democratic Unity (Movimento de Unidade Democrática) in 1945. It boycotted the election and Salazar won handily, on 18 November 1945.
President Óscar Carmona died in 1951 after 25 years in office and was succeeded by Francisco Craveiro Lopes. However, Lopes was not willing to give Salazar the free hand that Carmona had given him, and was forced to resign just before the end of his term in 1958. Naval Minister Américo Tomás, a staunch conservative, ran in the 1958 elections as the official candidate. General Humberto Delgado was the opposition candidate. Delgado was credited with only around 25% of the votes with 52.6% in favor of Tomás, despite the consensual opinion that Delgado would have won had the count been honest. Evidence later surfaced that the PIDE had stuffed the ballot boxes with votes for Tomás. After the elections, Delgado was expelled from the Portuguese Military, and took refuge in the Brazilian embassy before going into exile, spending much of it in Brazil and later in Algeria. To keep opposition candidates from coming to power in 1959, Salazar abolished direct election of presidents in favor of election by the National Assembly—which was firmly controlled by the regime—serving as an electoral college.
On 23 January 1961, military officer and politician Henrique Galvão led the hijacking of the Portuguese passenger ship Santa Maria. The terrorist operation was successful as anti-regime propaganda but killed one man in the process. Galvão claimed that his intentions were to sail to the Overseas Province of Angola to set up in Luanda a renegade Portuguese Government in opposition to Salazar. Galvão released the passengers in negotiation with Brazilian officials in exchange for political asylum in Brazil.
In 1962, the Academic Crisis occurred. The regime, fearing the growing popularity of both purely democratic and communist ideas among the students, carried out the boycott and closure of several student associations and organizations, including the important National Secretariat of Portuguese Students. Most members of this organization were opposition militants, among them many communists. The political activists who were anti-regime used to be investigated and persecuted by PIDE-DGS, the secret police, and according to the gravity of the offence, were usually sent to jail or transferred from one university to another in order to destabilize oppositionist networks and its hierarchical organization. The students, with strong support from the clandestine Portuguese Communist Party, responded with demonstrations which culminated on 24 March with a huge student demonstration in Lisbon, that was vigorously suppressed by the riot police. Marcelo Caetano, distinguished member of the regime and the incumbent rector of the University of Lisbon, resigned.
The reluctance of many young men to embrace the hardships of the Portuguese Colonial War resulted in hundreds of thousands of Portuguese citizens each year leaving to seek economic opportunities abroad in order to escape conscription. In over 15 years, nearly one million emigrated to France, another million to the United States, many hundreds of thousands to Germany, Switzerland, the United Kingdom, Luxembourg, Venezuela, or Brazil. Political parties, such as the Socialist Party, persecuted at home, were established in exile. The only party which managed to continue (illegally) operating in Portugal during all the dictatorship was the Portuguese Communist Party.
In 1964, Delgado founded the Portuguese National Liberation Front in Rome, stating in public that the only way to end the Estado Novo would be by a military coup, while many others advocated a national uprising approach.
Delgado and his Brazilian secretary, Arajaryr Moreira de Campos, were murdered on 13 February 1965 in Spain after being lured into an ambush by PIDE.
According to some Portuguese conservative scholars like Jaime Nogueira Pinto and Rui Ramos, Salazar's early reforms and policies allowed political and financial stability and therefore social order and economic growth, after the politically unstable and financially chaotic years of the Portuguese First Republic (1910–1926). Other historians like, the also left-wing politician, Fernando Rosas, point out that Salazar's policies from the 1930s to the 1950s, led to economic and social stagnation and rampant emigration, turning Portugal into one of the poorest countries in Europe, that was also thwarted by scoring lower on literacy than its peers of the Northern Hemisphere.
Salazar suffered a stroke in 1968. As it was thought that he did not have long to live, Tomás replaced him with Marcelo Caetano, a reputed scholar of the University of Lisbon Law School, statesman and a distinguished member of the regime. Salazar was never informed of this decision, and reportedly died in 1970 still believing he was prime minister. Most of the people hoped Caetano would soften the edges of Salazar's authoritarian regime and modernize the already growing economy. Caetano moved on to foster economic growth and made important social improvements, such as the awarding of a monthly pension to rural workers who had never had the chance to pay social security. Some large scale investments were made at national level, such as the building of a major oil processing centre in Sines. The economy reacted very well at first, but into the 1970s some serious problems began to show, due in part to two-digit inflation (from 1970 and on) and to the effects of the 1973 oil crisis. However, the oil crisis of 1973 had a potentially beneficial effect to Portugal because the largely unexploited oil reserves that Portugal had in its overseas territories of Angola, and São Tomé and Príncipe were being developed at a fast pace.
Although Caetano was fundamentally an authoritarian, he did make some efforts to open up the regime. Soon after taking power, he rebranded the regime as the "Social State," and slightly increased freedom of speech and the press. These measures did not go nearly far enough for a significant element of the population who had no memory of the instability which preceded Salazar. The people were also disappointed that Caetano was unwilling to open up the electoral system; the 1969 and 1973 elections saw the National Union—renamed People's National Action—sweep every seat, as before. However, Caetano had to expend all of his political capital to wring even these meager reforms had out of the hardliners in the regime—most notably Tomás, who was not nearly as content to give Caetano the free rein that he gave Salazar. Caetano was thus in no position to resist when Tomás and the other hardliners forced the end of the reform experiment in 1973.
During the 1940s and 1950s, Portugal experienced economic growth due to increased raw material exports to the war-ravaged and recovering nations of Europe. Until the 1960s, however, the country remained very poor and largely underdeveloped due to its disadvantaged starting position and lack of effective policies to counter that situation. Salazar managed to discipline the Portuguese public finances, after the chaotic First Portuguese Republic of 1910–1926, but consistent economic growth and development remained scarce until well into the 1960s, when due to the influence of a new generation of technocrats with background in economics and technical-industrial know-how, the Portuguese economy started to take off with visible accomplishments in the people's quality of life and standard of living, as well as in terms of secondary and post-secondary education attainment. During the early period of Salazar's rule, a brand new road system was built, new bridges spanned the rivers, and an educational program was able to build a primary school in each Portuguese town (an idea developed and begun during the democratic First Republic). Some liberal economic reforms advocated by elements of the ruling party, which were successfully implemented under similar circumstances in neighboring Spain, were rejected out of fear that industrialization would destabilize the regime and its ideological base and would strengthen the Communists and other left-wing movements.
In 1958, when the Portuguese government announced the 1959–64 Six-Year Plan for National Development, a decision had been reached to accelerate the country's rate of economic growth, a decision whose urgency grew with the outbreak of guerrilla warfare in Angola in 1961 and in Portugal's other African territories thereafter. Salazar and his policy advisers recognized that additional military expenditure needs, as well as increased transfers of official investment to the "overseas provinces," could only be met by a sharp rise in the country's productive capacity. Salazar's commitment to preserving Portugal's "multiracial, pluricontinental" state led him reluctantly to seek external credits beginning in 1962, an action from which the Portuguese treasury had abstained for several decades.
Beyond military measures, the official Portuguese response to the "winds of change" in the African colonies was to integrate them administratively and economically more closely with the mainland. This was accomplished through population and capital transfers, trade liberalization, and the creation of a common currency, the so-called Escudo Area. The integration program established in 1961 provided for the removal of Portugal's duties on imports from its overseas territories by January 1964. The latter, on the other hand, were permitted to continue to levy duties on goods imported from Portugal but at a preferential rate, in most cases 50 percent of the normal duties levied by the territories on goods originating outside the Escudo Area. The effect of this two-tier tariff system was to give Portugal's exports preferential access to its colonial markets. The economies of the overseas provinces, especially those of both the Overseas Province of Angola and Mozambique, boomed.
The liberalization of the Portuguese economy gained a new impetus under Salazar's successor, Prime Minister Marcello José das Neves Caetano (1968–1974), whose administration abolished industrial licensing requirements for firms in most sectors and in 1972 signed a free trade agreement with the newly enlarged European Community. Under the agreement, which took effect at the beginning of 1973, Portugal was given until 1980 to abolish its restrictions on most community goods and until 1985 on certain sensitive products amounting to some 10 percent of the EC's total exports to Portugal. Starting in 1960, EFTA membership and a growing foreign investor presence contributed to Portugal's industrial modernization and export diversification between 1960 and 1973. Caetano moved on to foster economic growth and some social improvements, such as the awarding of a monthly pension to rural workers who had never had the chance to pay social security. Some large scale investments were made at national level, such as the building of a major oil processing center in Sines. Notwithstanding the concentration of the means of production in the hands of a small number of family-based financial-industrial groups, Portuguese business culture permitted a surprising upward mobility of university-educated individuals with middle-class backgrounds into professional management careers. Before the 1974 Carnation Revolution, the largest, most technologically advanced (and most recently organized) firms offered the greatest opportunity for management careers based on merit rather than by accident of birth. In 1960, at the initiation of Salazar's more outward-looking economic policy, Portugal's per capita GDP was only 38 percent of the European Community (EC-12) average; by the end of the Salazar period, in 1968, it had risen to 48 percent; and in 1973, under the leadership of Marcelo Caetano, Portugal's per capita GDP had reached 56.4 percent of the EC-12 average. On a long term analysis, after a long period of economic divergence before 1914, and a period of chaos during the First Republic, the Portuguese economy recovered slightly until 1950, entering thereafter on a path of strong economic convergence with the wealthiest economies of Western Europe, until the Carnation Revolution in April 1974. Portuguese economic growth in the period 1960 to 1973 under the Estado Novo regime (and even with the effects of an expensive war effort in African territories against independence guerrilla groups), created an opportunity for real integration with the developed economies of Western Europe. Through emigration, trade, tourism and foreign investment, individuals and firms changed their patterns of production and consumption, bringing about a structural transformation. Simultaneously, the increasing complexity of a growing economy raised new technical and organizational challenges, stimulating the formation of modern professional and management teams. By the early 1970s Portugal's fast economic growth with increasing consumption and purchase of new automobiles set the priority for improvements in transportation. Brisa – Autoestradas de Portugal was founded in 1972 and the State granted the company a 30-year concession to design, build, manage, and maintain a modern network of express motorways.
The economy of Portugal and its overseas territories on the eve of the Carnation Revolution (a military coup on 25 April 1974) was growing well above the European average. Average family purchasing power was rising together with new consumption patterns and trends and this was promoting both investment in new capital equipment and consumption expenditure for durable and nondurable consumer goods.
The Estado Novo regime economic policy encouraged and created conditions for the formation of large and successful business conglomerates. Economically, the Estado Novo regime maintained a policy of corporatism that resulted in the placement of a big part of the Portuguese economy in the hands of a number of strong conglomerates, including those founded by the families of António Champalimaud (Banco Pinto & Sotto Mayor, Cimpor), José Manuel de Mello (CUF – Companhia União Fabril, Banco Totta & Açores), Américo Amorim (Corticeira Amorim) and the dos Santos family (Jerónimo Martins). Those Portuguese conglomerates had a business model with similarities to South Korean chaebols and Japanese keiretsus and zaibatsus. The Companhia União Fabril (CUF) was one of the largest and most diversified Portuguese conglomerates with its core businesses (cement, chemicals, petrochemicals, agrochemicals, textiles, beer, beverages, metallurgy, naval engineering, electrical engineering, insurance, banking, paper, tourism, mining, etc.) and corporate headquarters located in mainland Portugal, but also with branches, plants and several developing business projects all around the Portuguese Empire, especially in the Portuguese territories of Angola and Mozambique. Other medium-sized family companies specialized in textiles (for instance those located in the city of Covilhã and the northwest), ceramics, porcelain, glass and crystal (like those of Alcobaça, Caldas da Rainha and Marinha Grande), engineered wood (like SONAE near Porto), canned fish (like those of Algarve and the northwest), fishing, food and beverages (alcoholic beverages, from liqueurs like Licor Beirão and Ginjinha, to beer like Sagres, were produced across the entire country, but Port Wine was one of its most reputed and exported alcoholic beverages), tourism (well established in Estoril/Cascais/Sintra and growing as an international attraction in the Algarve since the 1960s) and in agriculture (like the ones scattered around the Alentejo – known as the breadbasket of Portugal) completed the panorama of the national economy by the early 1970s. In addition, the rural population was committed to agrarianism—greatly important for a majority of the total population, with many families living exclusively from agriculture or complementing their salaries with farming, husbandry and forestry yields.
Besides that, the overseas territories were also displaying impressive economic growth and development rates from the 1920s onwards. Even during the Portuguese Colonial War (1961–1974), a counterinsurgency war against independentist guerrilla and terrorism, the overseas territories of Angola and Mozambique (Portuguese Overseas Provinces at the time) had continuous economic growth rates and several sectors of its local economies were booming. They were internationally notable centres of production of oil, coffee, cotton, cashew, coconut, timber, minerals (like diamonds), metals (like iron and aluminium), banana, citrus, tea, sisal, beer (Cuca and Laurentina were successful beer brands produced locally), cement, fish and other sea products, beef and textiles. Tourism was also a fast developing activity in Portuguese Africa both by the growing development of and demand for beach resorts and wildlife reserves. While the counterinsurgency war was won in Angola, it was less than satisfactorily contained in Mozambique and dangerously stalemated in Portuguese Guinea from the Portuguese point of view, so the Portuguese Government decided to create sustainability policies in order to allow continuous sources of financing for the war effort in the long run. On 13 November 1972, a sovereign wealth fund (Fundo do Ultramar - The Overseas Fund) was enacted through the Decree Law Decreto-Lei n.º 448/ /72 and the Ministry of Defense ordinance Portaria 696/72, in order to finance the counterinsurgency effort in the Portuguese overseas territories. In addition, new Decree Laws (Decree Law: Decretos-Leis n.os 353, de 13 de Julho de 1973, e 409, de 20 de Agosto) were enforced in order to cut down military expenses and increase the number of officers by incorporating irregular militia as if they were regular military academy officers.
Labour unions were not allowed and a minimum wage policy was not enforced. However, in a context of an expanding economy, bringing better living conditions for the Portuguese population in the 1960s, the outbreak of the colonial wars in Africa set off significant social changes, among them the rapid incorporation of more and more women into the labour market. Marcelo Caetano moved on to foster economic growth and some social improvements, such as the awarding of a monthly pension to rural workers who had never had the chance to pay social security. The objectives of Caetano's pension reform were threefold: enhancing equity, reducing fiscal and actuarial imbalance, and achieving more efficiency for the economy as a whole, for example, by establishing contributions less distortive to labour markets or by allowing the savings generated by pension funds to increase the investments in the economy. In 1969, with the replacement of António de Oliveira Salazar by Marcelo Caetano, the Estado Novo-controlled nation got indeed a very slight taste of democracy and Caetano allowed the formation of the first democratic labour union movement since the 1920s.
Until the 1960s, post-primary education was limited to a tiny elite. In general, teenagers used to leave school and start to work early. In contrast with other European nations, the country had a poor record in educational policies since the 19th century. By the end of the 19th century the illiteracy rate was at over 80 percent and higher education was reserved for a small percentage of the population. 68.1 percent of Portugal's population was still classified as illiterate by the 1930 census. Portugal's literacy rate by the 1940s and early 1950s remained low for North American and Western European standards at the time. However, in the 1960s the country made public education available for all children between the ages of six and twelve, founded universities in the overseas provinces of Angola and Mozambique (the University of Luanda and the University of Lourenço Marques during the period of Adriano Moreira as Minister of the Overseas Provinces), recognized the Portuguese Catholic University in 1971, and by 1973 a wave of new state-run universities were founded across mainland Portugal (the Minho University, the New University of Lisbon, the University of Évora, and the University of Aveiro – Veiga Simão was the Minister in charge for education by then). In addition, the long established Lisbon and Coimbra universities were highly expanded and modernized in the 1960s. New buildings and campuses were constructed, like the Cidade Universitária (Lisbon) and the Alta Universitária (Coimbra). The last two decades of the Estado Novo, from the 1960s to the 1974 Carnation Revolution, were marked by strong investment in secondary and university education, which experienced in this period one of the fastest growth rates of Portuguese education history to date. Though this corresponded to significant growth of post-primary enrollment in larger urban areas, yet there was a gap to be filled in the following years, given the little time to overcome their disadvantaged starting position. The massification of secondary education was only achieved in the late 1970s and 1980s, so by the time of the Carnation Revolution in 1974 illiteracy was receding, but low-literacy and illiteracy was still high, compared with the highest standards already achieved by the most developed countries in the world.
Egas Moniz, a Portuguese physician who developed the cerebral angiography and leucotomy, received in 1949 the Nobel Prize in Physiology or Medicine – even now, the only Portuguese recipient of a Nobel in the sciences.
After India achieved independence in 1947 under the Attlee government, pro-Indian residents of the Portuguese overseas territory of Dadra and Nagar Haveli, with the support of the Indian government and the help of pro-independence organisations, liberated Dadra and Nagar Haveli from Portuguese rule in 1954. In 1961, the fort of São João Baptista de Ajudá's annexation by the Republic of Dahomey was the start of a process that led to the final dissolution of the centuries-old Portuguese Empire. According to the census of 1921 São João Baptista de Ajudá had 5 inhabitants and, at the moment of the ultimatum by the Dahomey Government, it had only 2 inhabitants representing Portuguese Sovereignty. Another forcible retreat from overseas territories occurred in December 1961 when Portugal refused to relinquish the territories of Goa, Daman and Diu. As a result, the Portuguese army and navy were involved in armed conflict in its colony of Portuguese India against the Indian Armed Forces. The operations resulted in the defeat of the limited Portuguese defensive garrison, which was forced to surrender to a much larger military force. The outcome was the loss of the remaining Portuguese territories in the Indian subcontinent. The Portuguese regime refused to recognize Indian sovereignty over the annexed territories, which continued to be represented in Portugal's National Assembly. The so-called "Winds of Change" concerning historical colonization in Europe-ruled overseas territories, started to have influence over the centuries-old empire. The end of the Estado Novo effectively began with the uprisings in the overseas territories in Africa during the 1960s. The independence movements active in Portuguese Angola, Portuguese Mozambique and Portuguese Guinea were supported by both the United States and the Soviet Union, which both wanted to end all colonial empires and expand their own spheres of influence.
For the Portuguese ruling regime, the centuries-old overseas empire was a matter of national interest. The criticism against some kinds of racial discrimination in the Portuguese African territories were refuted on the grounds that all Portuguese Africans would be Westernized and assimilated in due time, through a process called civilising mission. The wars had the same effects in Portugal as the Vietnam War in the United States, or the Afghanistan War in the Soviet Union; they were unpopular and expensive lengthy wars which were isolating Portugal's diplomacy, leading many to question the continuation of the war and, by extension, the government. Although Portugal was able to maintain some superiority in the colonies by its use of elite paratroopers and special operations troops, the foreign support to the guerrillas, including arms embargoes and other sanctions against the Portuguese, made them more maneuverable, allowing them to inflict losses on the Portuguese army. The international community isolated Portugal due to the long-lasting Colonial War. The situation was aggravated by the illness of Salazar, the strong man of the regime, in 1968. His replacement was one of his closest advisors, Marcelo Caetano, who tried to slowly democratize the country, but could not hide the obvious dictatorship that oppressed Portugal. Salazar died in 1970.
After spending the early years of his priesthood in Africa, the British priest Adrian Hastings created a storm in 1973 with an article in The Times about the "Wiriyamu massacre" in Mozambique, revealing that the Portuguese Army had massacred some 400 villagers at the village of Wiriyamu, near Tete, in December 1972. His report was printed a week before the Portuguese prime minister, Marcelo Caetano, was due to visit Britain to celebrate the 600th anniversary of the Anglo-Portuguese Alliance. Portugal's growing isolation following Hastings's claims has often been cited as a factor that helped to bring about the "carnation revolution" coup which deposed the Caetano regime in 1974.
The various conflicts forced the Salazar and subsequent Caetano governments to spend more of the country's budget on colonial administration and military expenditures, and Portugal soon found itself increasingly isolated from the rest of the world. After Caetano succeeded to the presidency, the colonial war became a major cause of dissent and a focus for anti-government forces in Portuguese society. Many young dissidents, such as left-wing students and anti-war activists, were forced to leave the country so they could escape imprisonment or conscription. However, between 1945 and 1974, there were also three generations of militants of the radical right at the Portuguese universities and schools, guided by a revolutionary nationalism partly influenced by the political sub-culture of European neofascism. The core of the struggle of these radical students lay in an uncompromising defence of the Portuguese Empire in the days of the authoritarian regime.
By the early 1970s, the Portuguese Colonial War continued to rage on, requiring a steadily increasing budget. The Portuguese military was overstretched and there was no political solution or end in sight. While the human losses were relatively small, the war as a whole had already entered its second decade. The Portuguese ruling regime of Estado Novo faced criticism from the international community and was becoming increasingly isolated. It had a profound impact on Portugal – thousands of young men avoided conscription by emigrating illegally, mainly to France and the US.
The war in the colonies was increasingly unpopular in Portugal itself as the people became weary of war and balked at its ever-rising expense. Many ethnic Portuguese of the African overseas territories were also increasingly willing to accept independence if their economic status could be preserved. However, despite the guerrilla unpredictable and sporadic attacks against targets all over the countryside of the Portuguese African territories, the economies of both Portuguese Angola and Mozambique were booming, cities and towns were expanding and prospering steadily over time, new transportation networks were being opened to link the well-developed and highly urbanized coastal strip with the most remote inland regions, and the number of ethnic European Portuguese migrants from mainland Portugal (the metrópole) increased fastly since the 1950s (although always as a small minority of each territory's total population).
Suddenly, after some failed attempts of military rebellion, in April 1974 the Carnation Revolution in Lisbon, organized by left-wing Portuguese military officers – the Armed Forces Movement (MFA), overthrew the Estado Novo regime. The military-led coup can be described as the necessary means of bringing back democracy to Portugal, ending the unpopular Colonial War where thousands of Portuguese soldiers had been commissioned, and replacing the authoritarian Estado Novo (New State) regime and its secret police which repressed elemental civil liberties and political freedoms. However, the military coup's organization started as a professional class protest of Portuguese Armed Forces captains against a decree law: the Dec. Lei nº 353/73 of 1973. Younger military academy graduates resented a program introduced by Marcello Caetano whereby militia officers who completed a brief training program and had served in the overseas territories' defensive campaigns, could be commissioned at the same rank as military academy graduates. Caetano's Portuguese Government had begun the program (which included several other reforms) in order to increase the number of officials employed against the African insurgencies, and at the same time cut down military costs to alleviate an already overburdened government budget. After the coup, the MFA-led National Salvation Junta, a military junta, took power. Caetano resigned, and was flown under custody to the Madeira Islands where he stayed for a few days. He then flew to exile in Brazil. By 1975 the Portuguese Empire had all but collapsed.
After the Estado Novo the country would then experience a turbulent period of provisional governments and a nearly disintegrated state reminiscent of the First Republic, a condition that the Estado Novo had so assiduously attempted to avoid. These provisional governments also briefly censored newspapers and detained oppositionists. Historian Kenneth Maxwell considers that, for many reasons, Portugal, in its transition from authoritarian rule to a more democratic government, resembled Nicaragua more than any other among the South American nations. During the final months of Franco's dictatorship, which had survived to this point, Spain considered invading Portugal to check the perceived threat of communism caused by the Carnation Revolution.
After a period of social unrest, factionalism, and uncertainty in Portuguese politics, between 1974 and 1976, neither far left nor far right radicalism prevailed. However, pro-communist and socialist elements retained control of the country for several months before elections. Álvaro Cunhal's Portuguese Communist Party (PCP) remained Stalinist in outlook and unsympathetic to the sort of reforms that were emerging as "Euro-Communism" in other countries in Western Europe.
The retreat from the colonies and the acceptance of its independence terms which would create newly independent communist states in 1975 (most notably the People's Republic of Angola and the People's Republic of Mozambique) prompted a mass exodus of Portuguese citizens from Portugal's African territories (mostly from Portuguese Angola and Mozambique), creating over a million destitute Portuguese refugees — the retornados. By 1975, all the Portuguese African territories were independent and Portugal held its first democratic elections in 50 years. However, the country continued to be governed by a military-civilian provisional administration until the Portuguese legislative election of 1976.
For the Portuguese and their former colonies, this was a very difficult period, but many felt that the short-term effects of the Carnation Revolution were well worth the trouble when civil rights and political freedoms were achieved. The Portuguese celebrate Freedom Day on 25 April every year, and the day is a national holiday in Portugal.
By refusing to grant independence to its overseas territories in Africa, the Portuguese ruling regime of Estado Novo was criticized by most of the international community, and its leaders Salazar and Caetano were accused of being blind to the "Winds of change". After the Carnation revolution in 1974 and the fall of the incumbent Portuguese authoritarian regime, almost all the Portugal-ruled territories outside Europe became independent. For the regime, the retention of those overseas possessions had been a matter of national interest.