During World War II, Portugal could be better described as being under a fascist-oriented regime known as the Estado Novo. Although Portugal was initially declared neutral, with the fall of Salazar and the rise of Manuel II to power in 1942 in his second coronation as King of Portugal, the country would go on to support the Axis powers. This led the rise of an absolute monarchy under the rule of the new King, known as Nova Monarquia (English : New Monarchy).
It was on 1 of February 1908, in the Praça do Comércio, Lisbon, that King Carlos I, his wife Amélie of Orléans and heir Luis Filipe, the Prince Royal would be assassinated by Manuel Buiça and Alfredo Costa, two sympathizers with the republican cause. Prince Manuel, who had only been hit in the arm was, after a few hours, acclaimed King of Portugal.
In an attempt to save the fragile monarchy, the young King dismissed João Franco of his position as prime-minister. Franco, seeing in this a sign of the King's inexperience and weakness, plotted to have him assassinated. This plan and the fact that Franco was still a powerful and dangerous man alerted the royal bodyguard, who fearing the success of Franco's operation, arranged for the King to go to exile in England, where years later he would become friends with Adolf Hitler .
Although initially an Anglophile exiled in England, King Manuel could not forgive 1880's British Ultimatum, which saw the British breach the oldest alliance in the world, cemented by the Treaty of Windsor in 1386. This was seen by the deposed monarch as an unforgivable act of betrayal and led Manuel to swear revenge against the United Kingdom.
The First Republic
The Portuguese First Republic took place between 5 of October 1910 and 1926, where a coup took place that overthrew the government and instituted a military dictatorship known initially as Ditadura Nacional and later as Estado Novo. The military's lack of experience in government led to the appointment of António de Oliveira Salazar as Minister of Finance in 1926 and 1928. His image of honesty and effectiveness built while in office paved the way for him to become Prime Minister in 1932.
Fall of the Estado Novo
In April 1939, Portugal refused the invitation to join the Anti-Comintern Pact , an alliance between Germany, Italy and Japan. Salazar's decision to stick with the oldest alliance in the world was seen by Adolf Hitler not only as a sign Portugal's weakness but also a good excuse to place his good friend Manuel II as the new ruler.
The Nazi German plan of invading the Iberian Peninsula and taking control of it had been put on hold but Hitler decided to activate it after Portugal's refusal to join the Axis powers. The Nazis began with the occupation of Porto, Lisbon and Setúbal and had the country under control within two weeks. António de Oliveira Salazar was faced with either exile or death. He would go on to live in São Paulo, Brazil, where went on to become one of the most successful businessmen in the history of the country.
After the occupation was secured, the Nazis immediately secured bases in the Azores and Madeira islands. In 1940, Manuel II came back from his 32-year exile and was crowned King of Portugal again. In the day of his coronation, Hitler stood by his side in his support.
King Manuel immediately decided that Portugal would take the side of the Axis powers and decreted the beginning of a new era, which he called Nova Monarquia.
Treaty of Coimbra
A month later, King Manuel would make a public appearance where he revoked the Treaty of Windsor and announced the signature of a new treaty, this time with Nazi Germany, which he called the beginning of a "new, prosperous alliance". For him it was the beginning of what poet Fernando Pessoa described as the Fifth Empire, in which Portugal re-emerged as a powerful state. In the signature of the Treaty, on the 5 of May 1941, King Manuel said in his speech:
"This is a strange world we were born in, my friends. A world where friends betray and strangers help. A world where friends become our enemies, and strangers become our new friends."