ABSTRACT
The recent evolution of the Portuguese economy has been strongly affected by the austerity policies recommended by the Troika (the IMF, the European Central Bank and the European Commission) following the sovereign debt crisis, which resulted in Portugal agreeing to a bailout programme in May 2011 and exiting the three-year Economic Adjustment Programme in June 2014. The need to reduce the deficit and public debt 1 are the main objectives that have underpinned austerity policies and have brought the welfare state to the forefront of the debate on government retrenchment, in order to guarantee that it is possible to overcome the threat of insolvency or defaulting. However, the fiscal consolidation path might not allow for a proper debate on the future of the Portuguese social model. According to the OECD (2014), in Portugal ‘fiscal pressures mean that the government’s consolidation efforts are projected to persist. Careful targeting will be essential to ensure that crucial areas of social spending are protected’ (p. 1). In a period of sovereign debt crisis, austerity and the associated cuts in social spending seem almost inevitable. A fundamental issue, however, is whether the associated rescaling and reorganization of the Portuguese welfare state will increase inequality of opportunities in a country that ranks as having one of the most unequal income distributions in Europe, 2 which in turn can aggravate further the already dismal long-term growth prospects. The doubling of the unemployment rate to around 16 per cent in 2013, the option for decreasing real wages, especially in the public sector, combined with the fact that social spending did not increase in line with mounting social and labour-market problems resulted in income losses that were not equally shared and had adverse effects on social cohesion, with the crisis and austerity measures affecting the most vulnerable in particular and creating a more fragmented society (OECD, 2012, 2014).
