After becoming the first minority government in Portuguese democracy to complete a full 4-year term,[1] the Socialist Party was aiming a second term under the lead of Prime Minister António Guterres, as a good economy and Portugal's growing prestige, following the Expo 1998 and the support for the East-Timor cause, were strengthening the PS position.

Despite opinion polls predictions, the election results were labeled as a disappointment for the Socialists as the party failed to win a historical absolute majority by just one MP and barely improved their 1995 score, just 0.3 percentage points.

The Democratic Unity Coalition achieved an important climb in the scorecard, against those who predicted its irreversible decline after the end of the Socialist Bloc in the early 1990s.

For the first time, the Left Bloc, formed after the merger of several minor left-wing parties became represented in the parliament after electing two MPs.

For that leadership ballot, Marcelo Rebelo de Sousa announced his candidacy, just a few days after saying a phrase that would become famous in Portuguese politics, "Not even if Christ descends to earth, will I run.

The 2001 and 2002 budgets were approved with the abstention of this sole CDS–PP MP:[30][31] Campelo was ultimately suspended from CDS–PP, and from November 2000 onwards, sat as an Independent.

[36] By 2001, the economy was also showing strong signs of slowdown, in a time when Portugal was about to enter into the Euro common currency and was suffering from the global impact of the September 11 attacks.

[37] All these problems culminated in the December 2001 local elections, where the PS suffered a big defeat and saw major urban centers, mainly Lisbon and Porto, swing dramatically to the right-wing, so, in response, Guterres announced his resignation as Prime Minister.