Portugal’s Pragmatism Stakes Steady Economic Recovery

Portugal’s Pragmatism Stakes Steady Economic Recovery
Commerce Square, Lisbon, Portugal, Nov. 26, 2013 (photo by Flickr user mgkm photography, licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 2.0 Generic license).

With all eyes on Greece, especially after the International Monetary Fund (IMF) walked away from debt negotiations last week, bringing Athens that much closer to default, it is easy to miss that last week also marked the one-year anniversary of Portugal completing its bailout program. Portugal isn’t in the clear just yet: Its employment rate increased to 13.7 percent last month and debt to GDP ratio is 129 percent. But its economic situation has stabilized, and the government is repaying its debts on time, if not early.

Portugal signed its 78 billion euro economic adjustment program with the so-called troika of the European Commission, the European Central Bank (ECB) and the IMF when the Socialist Party was still in power in 2011. However, the bailout was approved by all three major parties in Portugal—the Socialist Party, the liberal Social Democratic Party (PSD) and the conservative Democratic and Social Center-People’s Party (CDS-PP)—which helped ease the implementation of the austerity program and quell broader opposition.

“Portugal is on the road to recovery,” says Nicolas Veron, a visiting fellow at the Peterson Institute for International Economics. Its bailout is generally considered to be a success. Over the past four years, the Portuguese government has reformed the labor market, housing market, banking sector and rent control regulations, as well as implemented a framework for debt restructuring and increased privatization. “None of these reforms are particularly spectacular on their own,” Veron notes, “but when you add them up they make a big difference.”

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