ABSTRACT
Although the Portuguese economy is still weak and characterised by permanent imbalances in its current trade balance deficit, the country’s political elites are highly committed to EMU. This approach with regard to the European Union is best symbolised by the depiction of Portugal as ‘a good pupil of the European Union’ (Pureza, 2011). This basically means that successive Portuguese governments have uncritically accepted reform packages from the European Union in the hope that this compliance will be well regarded by their counterparts in the supranational institutions. The ‘good pupil’ image is orientated towards the outside world, the technocratic establishment in Brussels and relevant core member states such as Germany, while neglecting the suffering of the population. This persistent desire on the part of Portuguese political elites to be praised by the technocratic elites and German politicians reached a peak when the Portuguese government emphasised during the crisis that ‘Portugal is not Greece’ (Portugal não é a Grécia, see Magone, 2014b). In 2002, Portugal was the first country to receive a letter on an excessive
budget deficit from the European Commission. Even before the financial, Euroand sovereign debt crises began in 2008, successive governments in Portugal had to implement austerity measures to keep the nation’s deficit below 3 per cent. However, this was only achieved at considerable social cost and with a decrease in GDP growth to below zero. In 2008, Portugal had a budget deficit of 3.1 per cent and a public debt ratio of 71.7 per cent (Eurostat, 2014b, c) Efforts aimed at convergence of the deficit were abandoned in 2009 when the
government was forced to deal with an economic recession and the bailout of several banks that had been affected by either toxic assets following the collapse of Lehman Brothers or the subsequent credit crunch. Critical in this regard was the Portuguese Business Bank (Banco Português de Negócios – BPN), which was mostly affected by the US financial crisis; it had to be bailed out by the government and was subsequently nationalised. This bailout was estimated to cost at least € 3.4 billion, and the deficit soared to 10.2 and 9.8 per cent in 2009 and 2010, respectively. The BPN bailout was heavily politicised, in part because several politicians from one of the main parties, the Social Democratic Party (Partido
Social Democrata – PSD), held top positions in the bank. Afterwards, the bank was sold for just €40 million to the Angolan Bank BIC by the PSD and Democratic Social Centre-People’s Party (Centro Democratico e Social-Partido Popular – CDS-PP) coalition government led by Prime Minister Pedro Passos Coelho. Parallel to this, public debt increased from 53.1 per cent of GDP in 2001 to 94 per cent at the end of 2010 (Eurostat, 2014b, c; for an excellent discussion of the problems of reform, see Torres, 2009). As one influential Portuguese political scientist has claimed, Portugal has a huge imbalance between its productive and distributive sectors. The country’s stagnant economy has only reinforced this, leading ultimately to what he calls the ‘end of illusions’ with regard to the main problem of the Portuguese political economy (Aguiar, 2005: 58). This chapter delineates the process that led to the intervention of the Troika in
Portugal. In the next section, the relationship between the Portuguese government and the Troika is discussed, followed by an early assessment of the outcomes of the implemented programme of reforms. The subsequent section deals with the impact on democracy and society at large. Finally, some conclusions will be drawn.
