Looking for a Success in the Euro Crisis Adjustment Programs: The Case of Portugal

Portugal’s economic adjustment program in 2010–14 under the troika was extensive, designed to address both its large debt and its anemic growth, so it might serve as a blueprint for reforms in the eurozone. This paper argues that, based on a diagnosis of the underlying problems of the Portuguese economy, the adjustment program failed to definitively address the public finance problems but succeeded in opening a pathway for reforms in the economy. On the negative side, public debt is still high, primary surpluses improved only modestly, and public spending barely fell as the problem of ever-rising pension payments remained unsolved. On the positive side, unemployment fell sharply, exports and the current account balance rose, capital and labor reallocated to more productive and tradable sectors, and the economy is growing faster than the European Union average for the first time in 15 years.