Portugal Dared to Cast Aside Austerity. It's Having a Major Revival.
Last edited Mon Jul 23, 2018, 11:56 AM - Edit history (1)
At a time of mounting uncertainty in Europe, the country has defied critics who insisted on austerity as the answer to the Continent’s economic and financial crisis.
LISBON — Ramón Rivera had barely gotten his olive oil business started in the sun-swept Alentejo region of Portugal when Europe’s debt crisis struck. The economy crumbled, wages were cut, and unemployment doubled. The government in Lisbon had to accept a humiliating international bailout.
But as the misery deepened, Portugal took a daring stand: In 2015, it cast aside the harshest austerity measures its European creditors had imposed, igniting a virtuous cycle that put its economy back on a path to growth. The country reversed cuts to wages, pensions and social security, and offered incentives to businesses.
The government’s U-turn, and willingness to spend, had a powerful effect. Creditors railed against the move, but the gloom that had gripped the nation through years of belt-tightening began to lift. Business confidence rebounded. Production and exports began to take off — including at Mr. Rivera’s olive groves. . .
At a time of mounting uncertainty in Europe, Portugal has defied critics who have insisted on austerity as the answer to the Continent’s economic and financial crisis. While countries from Greece to Ireland — and for a stretch, Portugal itself — toed the line, Lisbon resisted, helping to stoke a revival that drove economic growth last year to its highest level in a decade. . .
Voters ushered Mr. Costa, a center-left leader, into power in late 2015 after he promised to reverse cuts to their income, which the previous government had approved to reduce Portugal’s high deficit under the terms of an international bailout of 78 billion euros, or $90 billion. Mr. Costa formed an unusual alliance with Communist and radical-left parties, which had been shut out of power since the end of Portugal’s dictatorship in 1974. They united with the goal of beating back some of the toughest aspects of austerity, while balancing the books to meet eurozone rules.
The government raised public sector salaries, the minimum wage and pensions and even restored the amount of vacation days to prebailout levels over objections from creditors like Germany and the International Monetary Fund. Incentives to stimulate business included development subsidies, tax credits and funding for small and midsize companies.
Mr. Costa made up for the givebacks with cuts in infrastructure and other spending, whittling the annual budget deficit to less than 1 percent of its gross domestic product, compared with 4.4 percent when he took office. The government is on track to achieve a surplus by 2020, a year ahead of schedule, ending a quarter-century of deficits.
European officials are now admitting that Portugal may have found a better response to the crisis.'>>>
https://www.nytimes.com/2018/07/22/business/portugal-economy-austerity.html?
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