I have heard that the airline wants to set up an "Iberian" base which implies either the launch of a base in either Spain or Portugal. I'm very wary of the thought of Easy trying to set up a hub at MAD, because the airport is already quite busy and on domestic & trans-border flights there is already strong competition to IB from Spanair & Air Europa, and no doubt we will see the continued expansion of Vueling in Spain.
I doubt it will be Lisbon (or at least LIS!) because of the ridiculously high airport charges for that airport, but I wouldn't rule out more no-frills flights to Portugal. The country would love more no-frills flights that dont involve FAO!
PMI has already been snapped up by Air Berlin & their German alliance partners (Hapagfly & NIKI) and I'm sure Condor has a pretty big operation there as well. Am not sure if AGP/ALC would have a significant enough market for the type of ops that EZY want.