The Political Economy of Portuguese Crisis Years: The Road Not Taken

Abstract

This chapter is devoted to the analysis of Portuguese economy and society’s adjustment to the crisis years, in the context of the political economy approach of the European integration process. We argue that the causes of the crisis that stroke EU, and its more fragile countries in particular, had two sets of origins: the relapsed behaviour of some of those countries, Portugal included; the original sins in European and Monetary Union (EMU) design, and the somehow biased ways chosen to tackle the crisis, namely the political bargaining among its members, especially the most powerful ones. We conclude that mistakes were serious, the adjustment programmes were blunt, and the lessons are supposed to have been learnt. A fundamental lesson from the Portuguese crisis is that disruptive sudden stops can affect countries that are members of currency unions, even when those unions involve advanced economies, in the context of a non-fiscal union, such as is the case of EMU. Tellingly, the ways to deal with the crisis should consider not only economic and financial issues, but also encompass some sort of a political and social compromise. Otherwise, it is the global integration process that might be in jeopardy.